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Most Active Options Update: Citigroup Inc (C)

Citigroup Inc's January 2015 calls were used to construct a bullishly biased spread

by 5/6/2014 3:14 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is Citigroup Inc (NYSE:C).


Shares of Citigroup Inc are in the red this afternoon, last seen down 1.6%. In spite of this, call volume is running at a 16% mark-up to the average intraday pace, and it appears one speculator initiated a two-legged spread to bet on a longer-term rebound for the financial firm.

Earlier this afternoon on the Chicago Board Options Exchange (CBOE), two symmetrical blocks of 5,000 contracts changed hands simultaneously at C's January 2015 55- and 60-strike calls. The former traded at an ask price of $0.89, suggesting they were bought, while the latter crossed at a bid price of $0.29, implying they were sold. Meanwhile, implied volatility ticked higher at each leg, indicating the initiation of new positions. Simply stated, it appears a long call spread was established for a net debit of $0.60 per pair of contracts.

By playing this bullishly biased strategy, this trader is hoping C will be right at $60 at January 2015 options expiration, allowing her to pocket the maximum potential reward of $4.40 (the difference between the two strikes less the net debit). However, she will still begin to collect a profit with each step above breakeven at $55.60 (bought call strike plus net debit) C takes, although unlike initiating a long call outright, her reward is capped at $4.40, regardless of how high C may climb.

Looking at the charts, Citigroup Inc (NYSE:C) last traded north of $55 on Jan. 15, shortly before taking an earnings-induced tumble. In the ensuing sessions, the equity has shed nearly 16% to churn near $46.44. Should the equity fail to reclaim a perch atop the $55 mark over the next eight-plus months, risk to today's spread strategist is limited to the initial cash outlay.


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