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Speculators are betting on a short-term stumble for Citigroup Inc. (NYSE:C - 42.79), as evidenced by activity in C's options pits today. Of the roughly 19,000 puts that have traded, around 1,200 have crossed at the stock's 2/8 42-strike put. Almost all of these weekly options have changed hands at the ask price, and implied volatility was last seen 2 percentage points higher, indicating buy-to-open activity.
In order for these out-of-the-money puts to be profitable, C needs to be trading 2.2% below current levels to breach $41.86 (strike less volume-weighted average price of $0.14) by this Friday's close, at which point the weekly options will expire. Should the stock fail to fall below this breakeven mark, the most today's put buyers have risked is the initial premium paid.
Expanding the sentiment scope reveals that option traders have been placing bearish bets with some rapidity in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.79 ranks in the 80th percentile of its annual range. In simpler terms, puts have been bought to open over calls at a faster-than-usual clip in recent weeks.
Technically, the shares of C have been in a solid uptrend over the past seven months, with the stock bouncing nearly 74% from its annual low of $24.61, which was tagged on June 4. More recently, the equity has bested the broader S&P 500 Index (SPX) by nearly 9 percentage points during the last 60 sessions. Additionally, C hit a new annual peak of $43.34 on Jan. 25.
In light of this technical tenacity, the recent rush toward puts could simply represent shareholders protecting profits against a potential pullback. As it turns out, this recent foray into annual-high territory pushed the stock head-first into its upper Bollinger Band, suggesting C was nearing overbought waters.
At last check, the equity was down 0.3% in today's trading, following news that the U.S. Treasury has sold off its remaining shares of C.