Dan Deming's XLF Options Trade

Dan Deming of KKM Financial spoke on "Bloomberg Markets" about his options trading idea in Financial Select Sector SPDR Fund XLF.

The stock managed to break above $28.50, which has been a big resistance for a while. Deming thinks there's more upside after the breakout and he wants to use options to make a bullish bet. He wants to buy the Aug. 28.50 call, sell the Aug. 29 call and sell the August 29.50 call for a total cost of 14 cents.

The trade breaks even at $28.64 and if the stock closes at $29 at the August expiration, it's going to reach its maximal profit of 36 cents. Above $29, the profit starts to trail off and it goes back to zero at $29.36. If the stock closes above $29.36 at the August expiration, the trade is going to lose money.