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Fifth Third Bancorp Bears Eye a Near-Term Pullback

Traders expect FITB to resume its technical slump

by 12/3/2012 10:07 AM
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Put volume surged on regional lender Fifth Third Bancorp (NASDAQ:FITB - 14.65) during the course of Friday's session, with nearly 9,300 of these bearishly oriented options crossing the tape. This flurry of activity represented roughly five times the stock's average daily put volume of fewer than 1,900 contracts. Meanwhile, only about 3,000 calls were traded on FITB.

The most active strike was the January 2013 14 put, where 8,420 contracts changed hands. The majority of these puts were traded in a single block of 5,000 contracts, which crossed at the ask price of $0.35 around 3 p.m. Eastern. Open interest at this strike jumped over the weekend by 7,339 contracts, confirming the initiation of new bearish bets here on Friday.

However, that block of 5,000 January 14 puts traded at the same time as 180,000 FITB shares, suggesting a hedged player was at work. With FITB settling at $14.64 last Friday, the January 14 puts carried a delta of negative 0.33 -- implying a 33% chance of these options finishing in the money at expiration. Accordingly, the trader picked up enough shares to hedge just over one-third of his bearish put exposure to 500,000 shares.

Puts have become quite a popular choice on FITB lately. During the past 10 sessions, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 2.23 puts for every call on the shares. This ratio ranks higher than 86% of other such readings taken during the past year, indicating a stronger-than-usual preference for puts over calls.

Likewise, FITB's Schaeffer's put/call open interest ratio (SOIR) of 1.17 ranks in the 87th annual percentile, as short-term options players have been more bearishly aligned only 13% of the time during the past year.

Technically speaking, FITB skidded lower from early October through mid-November, but the shares have since bounced back from their recent lows. The stock is now up more than 15% year-to-date, though FITB's positive momentum has flattened out a bit near the overhead $15 level.

 Daily Chart of FITB since June 2012


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