Schaeffer's Trading Floor Blog

Options Check-Up: Citigroup Inc, Bank of America Corp, and Rite Aid Corporation

Analyzing recent option activity for C, BAC, and RAD

by 4/6/2014 4:12 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are financial firms Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC), plus drugstore chain Rite Aid Corporation (NYSE:RAD). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on C, BAC, and RAD.

  • While C has lost 9.6% so far this year to trade at $47.11, the equity has racked up a 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.69, which ranks in the 71st annual percentile. In other words, option traders have placed bullish bets over bearish at an accelerated pace during the past two weeks. A continuation of Citigroup Inc's losses may cause these option bulls to hit the exits, which could create additional technical pressure on the shares. At least short-term speculators can rest assured knowing that they purchased their bets at a reasonable price, from a volatility perspective -- the stock's Schaeffer's Volatility Index (SVI) of 24% ranks lower than 63% of comparable readings from the past year.

  • BAC -- which has advanced 40% over the past year to trade at $16.72 -- has been popular with option bulls recently. The equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 5.26 ranks 6 percentage points from a 12-month peak, indicating calls have been bought to open over puts at a near-annual-high rate of late. Meanwhile, Bank of America Corp's SVI of 26% ranks in the 43rd annual percentile, showing that short-term contracts are slightly more affordable than usual, relatively speaking.

  • On the other hand, puts have been purchased (relative to calls) at an annual-high rate in RAD's options pits, ahead of the company's fourth-quarter earnings report, slated for release before the market's open on Thursday, April 10. To be specific, the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.70 ranks the highest of all other comparable readings taken over the past year. Now is a good time to place pre-earnings bets on Rite Aid Corporation, which is up 22.5% year-to-date to trade at $6.20. The stock's SVI of 55% ranks in the 28th annual percentile, meaning short-term options are attractively priced right now.

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