By Saqib Iqbal Ahmed

NEW YORK, June 26 (Reuters) - Investors who have the most to win if Amazon, Disney and other consumer discretionary companies continue to push the sector higher are getting increasingly nervous, judging by their options activity.

Options bets tied to declines in an exchange-traded fund tracking the sector have been unusually popular, even as the S&P 500 consumer discretionary index has logged an 8 percent rise for the year, handily beating the S&P 500 and turning in the second-best performance among the nine S&P 500 sectors.

Earlier in June, the open interest in puts on the consumer discretionary sector ETF touched highs not seen since October 2011. Currently there are two put contracts open for each open call, the most bearish this ratio has been in nine months.

Open interest in puts has more than doubled to about 303,000 contracts over the last three months, compared with an 18 percent drop in calls, according to Trade Alert data.

Puts are option contracts that convey the right to sell shares at a predetermined price in the future and are often used to place bearish bets on shares.

But in this case, the surge in puts activity may not be signaling outright bearish sentiment.

"I think it's more of a hedge," said Scott Elisha, chief options strategist at Perigon Partners in San Francisco.

Elisha was looking in particular at puts betting on the ETF's shares dipping below $75 by mid-July, which at over 90,0000 contracts represents the biggest block of open interest in the ETF's near-term options. The ETF's shares were up 41 cents at $78 on Friday.

There are another 82,0000 put contracts open at the $69 and $74 strike prices and these expire in September.

"The (ETF's) shares are up about 8 percent this year and with July earnings around the corner, and big names set to report results, it looks like investors might have been picking up some protection," Elisha said.

The ETF touched an all-time high of $78.30 on Wednesday, and the low cost of buying downside protection might be the driving factor behind the increased hedging activity, suggested Susquehanna derivatives strategist Christopher Jacobson.

For example, the cost of 3-month 10 percent out-of-the-money XLY puts is now cheaper than it has been 95 percent of the time over the last five years, he said.

The appetite for cheap protection is understandable given that a lot of active managers are overweight the sector, strategists said.

Investors taking a longer-term view might also be concerned about the impact from the looming U.S. Federal Reserve interest rate hike.

"The sector typically under-performs when the Fed raises rates," said Jill Carey Hall, equity strategist at Bank of America Merrill Lynch, who is underweight the consumer discretionary sector.

The Federal Reserve is widely expected to raise interest rates for the first time in nearly a decade in September.

"Investors could just be starting to pay more attention to that," Hall said.

The threat of higher wages putting pressure on margins might also be on investor's minds. A number of big retailers and national chains, including McDonald's - one of the top five constituents of the ETF - have been raising wages of late.

"Given that the sector is labor intensive there could be concerns about this hurting margins," Hall said.

Recent corporate results, however, at two of the ETF's top ten constituents, - Walt Disney Co's and Nike Inc - have been strong, helped by increased consumer spending, and bode well for quarterly results from McDonald's, Amazon.com Inc and Starbucks Corp, due in July.

(Reporting by Saqib Iqbal Ahmed; Editing by Linda Stern and Tom Brown)