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Premium Sellers Expect Limited Upside for Fifth Third Bancorp

FITB is testing long-term resistance in the $14 region

by 2/9/2012 9:22 AM
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Financial concern Fifth Third Bancorp (FITB - 13.61) saw roughly 15,000 calls cross the tape yesterday -- about five times its average daily call volume. For comparison, fewer than 450 FITB puts changed hands. However, digging deeper into the data, it seems most of the speculators were employing calls to bet on limited upside for the stock over the short term.

Garnering the most attention was the narrowly out-of-the-money March 14 call, which saw open interest rise by more than 11,300 contracts overnight. However, 84% of the back-month calls traded at the bid price, suggesting they were sold. By writing the calls to open, the sellers are expecting the shares of FITB to remain south of the $14 level -- which has served as resistance for nearly a year -- over the next few weeks. In this best-case scenario, the calls will expire worthless, and the traders can pocket the initial premium received from the sale.

From a broader sentiment standpoint, it looks like the options crowd has been utilizing FITB calls for more traditional reasons of late. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day call/put volume ratio of 2.24. Compared to similar readings taken over the past year, this ratio registers in the 61st percentile, implying that option buyers have initiated bullish bets over bearish at a slightly accelerated clip during the past couple of weeks.


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