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Citigroup Inc (C) Speculators Continue to Favor Calls

However, not all of C's call volume is bullish in nature

by 7/23/2013 12:27 PM
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Citigroup Inc (NYSE:C) is trending slightly lower today, but that hasn't stopped call players from converging on the stock. Approximately 37,000 of these contracts have been exchanged thus far, which is almost double the number of puts traded. Taking a closer look at the action, it appears that one trader is rolling up a previous short call position to allow for additional upside in the recently rallying stock.

According to data pulled from Trade-Alert, the speculator in question bought to close a block of 5,000 contracts at the September 55 call for $1.08 each, while simultaneously selling to open a matching number of contracts at the September 57.50 call for $0.42 apiece. In other words, he is betting that C will remain south of the $57.50 mark through September expiration -- rendering the calls worthless, and allowing him to pocket the net credit received. By making this dual transaction, he has given his position more "headroom," although he may have trimmed his profit somewhat. This activity could also be reflective of a covered-call strategy, in which case the trader may actually be a shareholder looking to generate some income, or perhaps pick up a bit of downside protection on C.

Expanding the sentiment scope shows that Citigroup calls have been in vogue prior to today's session, albeit in a more traditional sense. The security's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at 1.87, conveying calls bought to open have almost doubled puts during the past two weeks. This ratio is docked in the 84th percentile of its annual range, indicating traders have been scooping up bullish options over bearish at faster-than-usual pace.

Sentiment among the brokerage bunch is optimistically skewed, as well. In fact, C boasts 16 "strong buys" and one "buy" endorsement, compared to three "holds" and one "strong sell" suggestion. Additionally, the stock's average 12-month price target of $58.09 denotes expected upside of about 10% from its current price of $52.82.

Today's slight downturn notwithstanding, Citigroup Inc (NYSE:C) has performed admirably on the technical front, gaining close to 34% year-to-date, and more than doubling in value during the past 12 months. The equity has also outpaced the broader S&P 500 Index (SPX) by north of 8 percentage points within the most recent four-week time frame.


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