Pre-Geithner Financial Butterflies

At this stage of the game, it is difficult to predict whether the markets will sell on the news following Geithner’s speech or rally on the possibility of progress.

One thing is much more likely: uncertainty and volatility associated with financial stocks is likely to drop significantly.

There are a number of ways to play the financial volatility game. A basic one is with a long butterfly spread, such as the one shown below, in which XLF is profitable if it stays in a 9.28 – 10.72 range in the next 1 ½ weeks.

[source: optionsXpress]