Options Traders Join Bank Bulls As ETFs Add Most Money Since ?08
Lu Wang Writes:
While expectations for higher interest rates are hanging over the U.S. market, bank stocks reflect little of the anxiety and options traders see no end to the gains.
They?re snapping up bullish contracts on the biggest financial exchange-traded fund as investors pile into bank shares at the fastest rate since 2008. The ratio of calls to puts on the ETF is near the highest level since 2012 and the cost of hedging against losses has fallen to an 11-month low, according to data compiled by Bloomberg.
Wall Street firms, at the center of the financial crisis seven years ago, are regaining investor confidence amid optimism that the Federal Reserve?s plan to raise interest rates will bolster profits. While bears cite heightened regulations and the risk of credit turmoil, money is flowing to the industry after banks reduced leverage and shored up balance sheets.
?People are looking at financials as a low-risk investment under the assumption that they will be relatively resilient in a rising rate environment,? Channing Smith, a managing director at Capital Advisors Inc. in Tulsa, Oklahoma, said by phone. The firm oversees about $1.5 billion and recently added holdings in regional banks. ?Even a modest rate increase will have a material impact on the profitability of these companies.?