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Citigroup Inc (NYSE:C) options are trading at a fairly typical pace so far today, with about 23,000 contracts on the tape. A significant number of these contracts changed hands around 10:00 a.m. ET, as one speculator forecast some longer-term upside for the shares.
Specifically, matching blocks of 3,707 December 48 and 52.50 calls traded. The lower-strike lot was bought to open for $2.18 per contract, while the higher-strike lot was sold to open for $0.69 apiece, per data from the International Securities Exchange (ISE). In other words, this speculator initiated a bull call spread on C for $1.49 per pair of contracts, using premium from the sold calls to offset some of the cost of the bought calls.
At-expiration breakeven for the two-legged trade is $49.49 (bought strike plus net debit). Additional gains will accrue with each step C is perched north of here when the contracts expire, until the security hits $52.50, at which case the sold calls will move into the money and reward will max out at $3.01 (difference between strikes minus net debit). On the other hand, the most the traders risk losing is the premium paid -- or about $550,000 (3,707 pairs of contracts * $1.49 net debit * 100 shares per contract) -- should the banking name finish at or below $48 when December options expiration rolls around.
At last check, Citigroup Inc (NYSE:C) was sitting just below breakeven at $47.11. From a longer-term perspective, the equity is staring at a year-to-date deficit of roughly 9.5%.