Reuters is reporting that, “Shares of the Select Sector SPDR Financial fund, which holds all the financial names from the S&P 500, fell 24 cents to $14.09 by mid-afternoon. One bearish player, expecting the shares of the underlying exchange-traded fund to continue to erode, purchased a ratio put spread in the September contract, said Interactive Brokers Group options analyst Caitlin Duffy. The investor picked up 10,000 puts at the September $14 strike for a premium of $1.40 each, and sold 20,000 puts at the lower September $11 strike to receive a premium of 56 cents apiece. Net premium paid to enact the bearish spread amounted to 28 cents per contract, she said. The trader is prepared to make money if (XLF) shares fall below the break-even price of $13.72 ahead of September expiration. Maximum potential profits of $2.72 per contract are available to the investor if shares drop to $11 at expiration day, she said. The (XLF) has not traded below $11 since the fund touched a 52-week low of $10.83 on July 8, 2009.”

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The Financial Select Sector SPDR (XLF) closed at $14.46 today, up about 1%.

XLF