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Citigroup's (C) New High Sparks a Flurry of Bullish Betting

Traders take a chance on C's front-month series of calls

by 2/12/2013 11:19 AM
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Bullish speculators have been swarming Citigroup Inc. (NYSE:C - 44.16) lately, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock's 50-day call/put volume ratio checks in at 1.83, indicating calls bought to open have nearly doubled puts during the last 10 weeks. This ratio registers higher than 84% of comparable readings taken within the past year, meaning traders have been scooping up calls over their bearish counterparts at an accelerated clip.

Today's options activity reflects more of the same, as roughly 65,000 calls have crossed the tape so far, more than doubling the equity's expected intraday volume. By comparison, around 29,000 puts have been exchanged. Traders have taken a shine to C's February 44 call, which has seen north of 9,400 contracts traded at a volume-weighted average price (VWAP) of $0.33.

The majority of these at-the-money calls changed hands at the ask price, pointing to buyer-driven volume. Meanwhile, implied volatility has ticked slightly higher during the course of the session, hinting at the initiation of new positions. If these calls were, in fact, bought to open, traders are counting on the banking giant to climb north of $44.33 (strike price plus the VWAP) by this Friday's close, when front-month options expire. Also of note, this option's delta sits at 55, suggesting there is a 55% chance these calls will finish in the money.

C has been a technical standout lately, boasting a year-over-year gain of about 31%, as well as a year-to-date advance of more than 11%. The stock has also bested the broader S&P 500 Index (SPX) by around 10 percentage points during the last three months. In fact, the shares cruised to a new multi-year high of $44.22 within the first 90 minutes of trading -- just a stone's throw away from the aforementioned breakeven rail. An extended trek higher by week's end could result in a win for today's front-month bulls.


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