Selling Puts On Financials? Worth The Risk.. Not Really (XLF)

This afternoon if you were watching CNBC you heard one of the guests say he believe selling puts on Wells Fargo (NYSE: WFC) and other financials such as Citi is a prudent way to play the upside in this current market. I might say something like that after a few highballs, though i doubt the guest was tipsy.


My guess is he wants to get into puts on the financials at a lower price, this is possible if there is a over supply of sellers across the board.


 It is a liqudity issue, you get on CNBC and talk about options to get retail to come to provide some liquidity which will facilitate price discovery. Given our current multi year low(s) for the VIX * NOT historical, it is not out of the question the volatility could pop at any given moment when an unforeseen market event happens. I think a less risky way of playing market upside is buying calls, you are long VOL and you know your risk. Yes, the guest could have been referring to writing put against your current positions but you still run the chance of being PUT into a stock long, not fun if the market collapses over night.

Posted in: xlf