It appears that the severe bearishness on the U.S. financial sector has subsided somewhat after the latest batch of earnings reports, with options indicating that investors' worst fears were put to rest. The question now is, can they continue to move onward and upward?
This bullish development comes from the options market for financial stocks. Three-month puts on the Financial Select Sector SPDR Fund (NYSE: XLF ) now only cost 10.15 points more than calls, a significant decrease from October 3, outpacing any other industry according to data from Bloomberg.
Many of the largest U.S. banks, including Citigroup (C) and Bank of America (BAC), have already posted third-quarter earnings, and options behavior indicates that investors were pricing in a lot of pessimism going into their earnings reports. But investors seem satisfied-data from Bloomberg shows that financial shares as a whole have gained 14% since October 3.
The 10 banks that have reported results so far this season have exceeded the average analyst estimate by 14 percent, with Citigroup and Bank of America beating them the most, according to Bloomberg.
For a look at the banks options traders are most optimistic about, we ran a screen on the financial sector for stocks with the greatest decreases in put/call ratio over the last 10 trading days, indicating a bullish change in sentiment.
Do you think, despite continuing fears of another global economic crisis, that these banks will continue to be surrounded by optimism? (Click here to access free, interactive tools to analyze these ideas.)
1. NorthStar Realty Finance (NYSE: NRF ) : Operates as a real estate investment trust in the United States. Market cap of $319.55M. Put/call ratio changed from 4.50 to 0.43 between 10/05/11 to 10/18/11, a change of -90.44%
2. NBT Bancorp (Nasdaq: NBTB ) : Provides commercial banking and financial services to individuals, corporations, and municipalities in central and upstate New York, northeastern Pennsylvania, and the greater Burlington, Vermont area. Market cap of $678.85M. Put/call ratio changed from 0.24 to 0.05 between 10/05/11 to 10/18/11, a change of -79.17%
3. Central Pacific Financial (NYSE: CPF ) : Operates as the bank holding company for Central Pacific Bank that provides commercial banking services to businesses, professionals, and individuals in Hawaii. Market cap of $455.38M. Put/call ratio changed from 0.11 to 0.03 between 10/05/11 to 10/18/11, a change of -72.73%
4. Arch Capital Group (Nasdaq: ACGL ) : Provides insurance and reinsurance products worldwide. Market cap of $4.54B. Put/call ratio changed from 0.57 to 0.20 between 10/05/11 to 10/18/11, a change of -64.91%
5. FirstMerit (Nasdaq: FMER ) : Operates as the bank holding company for FirstMerit Bank, N. Market cap of $1.38B. Put/call ratio changed from 0.18 to 0.07 between 10/05/11 to 10/18/11, a change of -61.11%
6. India Fund (NYSE: IFN ) : Asset Management Industry. Market cap of $1.19B. Put/call ratio changed from 0.51 to 0.20 between 10/05/11 to 10/18/11, a change of -60.78%
7. Invesco Mortgage Capital (NYSE: IVR ) : Operates as a mortgage real estate investment trust. Market cap of $693.29M. Put/call ratio changed from 0.56 to 0.22 between 10/05/11 to 10/18/11, a change of -60.71%
8. Unum Group (NYSE: UNM ) : Provides group and individual disability insurance products primarily in the United States and the United Kingdom. Market cap of $7.05B. Put/call ratio changed from 0.83 to 0.43 between 10/05/11 to 10/18/11, a change of -48.19%
9. American Campus Communities (NYSE: ACC ) : Engages in the acquisition, design, finance, development, lease, and management of student housing properties in the United States. Market cap of $2.67B. Put/call ratio changed from 0.91 to 0.51 between 10/05/11 to 10/18/11, a change of -43.96%
10. Southwest Bancorp (Nasdaq: OKSB ) : Operates as the holding company for the Stillwater National Bank and Trust Company and Bank of Kansas. Market cap of $90.59M. Put/call ratio changed from 0.06 to 0.04 between 10/05/11 to 10/18/11, a change of -33.33%.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Alexander Crawford does not own any of the shares mentioned above. Options data sourced from Schaeffer's, all other data sourced from Finviz.
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