Financials are acting pretty resilient compared to the rest of the market here. I think there's a good opportunity to play this either with: i) calls in selected financials e.g. LEH, WM, or just the sector ETF (XLF) ii) a spread, short S&P long financials iii) more aggressively - short commodity stocks/ETFs, long financials. This gives upside without too much outright market risk.
Implied volatility should get crushed if there really is a perception that the "worst" is over. We'll see.
mbi and abk showing big strength. But I do think people have a point with the 'worst is over' on this rally, the worst is over for the short sellers, xlf jumped almost 30% I dont think there is a whole lot of juice left
Tomorrow's FED meeting and the market reaction thereafter is a real wild card on the financials. I'd wait until Wed afternoon to open new option positions. Looks like some of the banks like WB and BAC are getting punched in the nuts today, as well. That earnings release from HSBC could prove to be an intermediate top.
ii) I spreaded XLE vs XLF the week before the sharp rise in XLF and the tanking in XLE. Handsomely rewarded. Then: anti- i) I sold 20 call strike when XLF was at 22.80. Very high vol, juicy. Spread it with 26 strike. Took the short strike off on revisit of 20.50. I am on sideline in XLF. If it goes up to 23 area (rince and repeat). If it goes back to 17, sell puts.