Banking on a rally or a pullback?
- Call options positions in BKU unusually high
- Trades mostly occurred over past two weeks
- Stock up 6% this year despite 13% pullback
While rotation away from tech continues to be a key market theme, financial stocks have actually been the S&P 500’s weakest link so far this year. As of Wednesday, the sector was down more than 6% for the year—significantly more than tech’s roughly 4% decline.
There is, however, a connection between the weakness in the two sectors. While AI disruption concerns were initially focused on software stocks early this year, brokerage and insurance stocks were among the financials that appeared to catch the “disruption flu” last month.
That made recent activity in one financial stock even more interesting. BankUnited (BKU), a moderately traded regional bank stock, was on top of the LiveAction scan for high options open interest (OI) on Wednesday, with total positions running more than 80 times average:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
BKU’s options chain showed these positions were concentrated in August call options—the $55, $65, and $70 strikes (representing prices roughly 16% to 48% above where BKU was trading on Wednesday):
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
There are two sides to every trade, so those inclined to assume these positions are potentially bullish need to bear in mind that the sellers of these calls may have the opposite outlook on the stock.
That said, BKU’s price chart shows a stock that has held up better than some to the financial sector’s weakness this year. Shares rallied as much as 46.5% off their October low to hit new all-time highs in January, and despite pulling back as much as 13% from those record levels as of Tuesday, the stock is still up roughly 6% for the year and up 28% since mid-October:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Finally, the call options trades all occurred over the past couple of weeks—most recently on Tuesday, which was when the recent pullback reached its current intraday low. For traders who may have been using calls to take bullish positions in the stock, the retreat from record highs may have provided an opportunity to buy at somewhat discounted prices.
Note: BKU is currently scheduled to release earnings in mid-April.
Market Mover Update: In their most recent update on the Middle East, Morgan Stanley & Co. strategists highlighted three developments that could help shed light on how long the conflict may last: a clearer prioritization of US objectives, Iranian military proxy activity, and traffic through the Strait of Hormuz.
Today’s numbers include (all times ET): job cuts (7:30 a.m.), weekly jobless claims (8:30 a.m.), Productivity and Labor Costs (8:30 a.m.), import and export prices (8:30 a.m.), EIA Natural Gas Report (10:30 a.m.).
Today’s earnings include (all times ET): Autohome (ATHM), Costco (COST), Gap (GAP), Kroger (KR), Marvell Technology (MRVL)
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1 MorganStanley.com. US/Iran: A Roadmap for the Next Few Weeks. 3/4/26.