There were no new additions to the Weeklys list so all we have to talk about is earnings next week. We are in a lull as far as the earnings cycle goes and the calendar of stocks with Weeklys reporting next week is mostly dominated by retailers. Retailers are more prone to reporting results based on quarters that end in January, April, July, and October. This anomaly related to retailers is due to December being a pretty busy month for the sector.
A trade using weeklys that caught my eye occurred this past Wednesday. Someone may be expecting relative calm from the financial sector and chose to sell a straddle on the Financial Select Sector SPDR (XLF – 22.55). The time frame for this outlook is as close to the end of August as they can get using the August 29th XLF 22.50 Call and Put. The trader sold 19,000 XLF Aug 29th 22.50 Calls for 0.22 and 19,000 XLF Aug 29th 22.50 Puts for 0.29 and a net credit of 0.51. Their hope is that the ETF finishes the day at 22.50 on August 29th as you can see in the payoff diagram below. If the fund has a 22 handle then the trade will be a partial profit as the break even prices are 21.99 and 23.01.
I decided to run down to the Bloomberg and take a look at what stocks are in the XLF ETF. Sector funds like this are often dominated by a few large stocks and that is the case for XLF as five stocks comprise about 36% of the fund –