Options Flow Summary: General Sentiment, XLF & PXP 8/23/2007 by Henry Schwartz General Sentiment Quiet trading continues with another day on pace for about 10 million contracts. The CBOE VIX remains stable near 23.2 and the broad averages are down slightly. At 12:30pm we saw 2.7 million puts and 2.5 million calls have traded with a slight bias to bearish positioning. Financial Select Sector ETF (XLF) With financials dominating the headlines, traders interested in this sector are looking to adjust their exposure in the space. The average daily volume in this ETF is a healthy 333,000 contracts. Today we are on pace for 400,000 contracts, with a bearish flow dominating. 160,000 puts have traded, versus just 60,000 calls, for a put/call ratio of 2.66. This is in line with recent activity. Spot price is $34.26, and the October 33 puts are the most active contract with nearly 30,000 traded. Buyers are initiating 84% of the flow. This includes an aggressive multi-market sweep of more than 10,000 contracts for $1 just after 10am this morning. Plains Exploration and Production Co (PXP) PXP is exhibiting unusual volume today with four times the recent daily average of 1,600 contracts. The flow is call dominated with net buyers focusing on September 35 strike calls with 3,300 on the tape. PXP was also busy yesterday with 5 times its recent daily average. We saw buyers in the Jan-08 40 calls 4,000 times creating new open interest. The company is buying Pogo (PPP) with the deal expected to close 10/31. This recent burst of call buying suggests traders are building upside positions for the rest of the year.