Many financial stocks have been in the spotlight in the past week, as rumors have caused them to sky rocket. I am sure you are quite familiar with them, as you've read about or watched their ticker symbol scroll by, but to mention four of them they are: American International Group (AIG), Citigroup (C), Fannie Mae (FNM), and Freddie Mac (FRE). Citigroup has not rallied nearly in step with the other three mentioned over the past week, but has had a much later rally than many of the other large financial names.

I am very skeptical of these names climbing so fast recently, and although I don't usually purchase and hold put options overnight (or call options for that matter, I use them frequently but usually trade out of them by market close), I have made an exception as I have purchased put options for American International Group (AIG) for the September 45 strike. I am bearish on the financial stocks in the short term, but extremely bearish on AIG. I am expecting a continued sell off, and I think a sell off will hit the financial sector the hardest as mentioned in Are Financial Stocks Especially Overpriced? Some Protective Ideas.

Financial stocks; too fast, too soon?

Looking at the first Heatmap below, we can see that financial stocks are up more on average than any other sector in the past month (and the most since the market bottom in early March - not shown). The majority of the box is the brightest level of green (the brightest level green indicates a 6% or greater increase in the stock, and the brightest level red indicates a 6% or greater decrease in the stock. See the Heatbar below the first Heatmap to get a detailed definition of colors % gain or loss). I have highlighted one of the larger market cap stocks JPMorgan Chase (JPM) to give an idea of how to read the Heatmap. The map is comprised of many different stocks, the larger the box the greater the market cap.