Kevin Kelly's Financial Select Sector SPDR Fund Trade

Kevin Kelly, the managing partner at Kelly & Co., suggested on Bloomberg Markets a bullish options strategy in Financial Select Sector SPDR Fund XLF.

He noticed a bullish options activity in the name as call options outnumbered puts 13 to 1. The biggest trade on Friday in XLF was the purchase of 15,000 contracts of the March 27 calls for $0.88, which means that options traders are expecting a good first quarter for the financials, said Kelly.

He suggested it would be a good idea to sell the January 2019, 24 strike put for $1.00 and buy the January 2019, 27/33 call spread for $1.62. The options structure would cost him $0.62 and it gives him more time. If the stock trades above $27.62 at the January 2019 expiration, the trade is going to make money. If the stock jumps to $33 or higher, the trade is going to reach its maximal profit of $5.38. If Financial Select Sector SPDR Fund trades below $24 at the January 2019 expiration, Kelly is going to have to purchase the stock at $24.