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Option Brief: Citigroup Inc (NYSE:C) put volume ran at nearly twice the typical speed yesterday, and in the process, edged out call volume. Nevertheless, the most active strike was on the call side of the fence, as traders wagered on long-term upside for the embattled shares.
Diving right in, 11,665 contracts traded on Thursday at C's in-the-money January 2016 40-strike call. Almost all of them -- including blocks of 7,750 and 3,800 -- crossed at the ask price, suggesting they were bought for a volume-weighted average price (VWAP) of $9.85. Open interest soared at the strike overnight, as well, hinting at buy-to-open activity.
By scooping up these LEAPS contracts, the buyers expressed confidence that Citigroup shares will muscle higher from their current perch at $46.45. Specifically, the speculators are looking for the financial stock to rally north of $49.85 (strike plus VWAP) by January 2016 options expiration. However, if C drops below $40 and the contracts expire out of the money, traders still holding onto the calls at that point will forfeit the initial premium paid.
On the charts, Citigroup Inc (NYSE:C) has struggled over the long term, sitting solidly in the red on both a year-to-date and year-over-year basis. Not surprisingly, therefore, Soros Fund Management revealed yesterday that it has dissolved its stake in the security.