Option traders take cautious stance in finance ETF

By Doris Frankel

CHICAGO, Feb 9 (Reuters) - Some option traders treaded with caution on Monday on expectations an exchange-traded fund tied to the financial sector will stay below key resistance levels in the near-term as they await details of a bank rescue plan.

U.S. Treasury Secretary Timothy Geithner is scheduled to announce the Obama administration's plan to stabilize the financial system at 11 a.m. EST (1600 GMT) on Tuesday.

Shares of the Financial Select Sector SPDR (XLF.P), an ETF that tracks all the financial-related companies from the Standard & Poor's 500 index .SPX, rose 10 cents to $9.90.

"The financials are up slightly on the day, but the options trading in the XLF is skeptical of a bigger rally, at least in the short term," said Chris McKhann, analyst at optionmonster.com.

Key resistance is pegged at the $10 level, "and at least one credit call spread initiated today would take a full profit anywhere below $10 by February expiration," McKhann added.

After the opening bell, a February call spread in the XLF traded with 31,000 contracts in each strike, analysts said.

The February $12 strike calls were bought for 16 cents a contract while the February $10 strike calls were sold for 68 cents for a net premium of 52 cents.

Traders often use a credit call spread to take a bearish position in the underlying shares with limited profit potential and limited risk.