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Bears Bet On a Pullback for Fifth Third

Back-month traders purchased FITB's 12-strike puts

by 5/25/2012 9:28 AM
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Financial concern Fifth Third Bancorp (FITB - 13.57) finished north of its 10-day moving average for the first time in nearly three weeks on Thursday. Nevertheless, it seems a few traders are anticipating a pullback for the equity, judging by yesterday's action in the options pits.

During the course of the session, FITB saw nearly 9,300 puts change hands -- more than four times its average daily volume. On the flip side, fewer than 3,500 FITB calls crossed the tape.

Garnering the bulk of the attention was the security's out-of-the-money July 12 put, which saw 2,261 contracts traded. Ninety-seven percent of the puts crossed at the ask price, and put open interest at the back-month strike ballooned by 2,236 contracts overnight, pointing to buy-to-open activity. By purchasing the puts to open, the buyers are expecting FITB to retreat beneath the $12 level within the next couple of months.

However, even before yesterday, option buyers were scooping up FITB puts at a near annual-high clip. Specifically, the equity has racked up a 10-day put/call volume ratio of 5.17 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Compared to similar readings taken during the past year, this ratio sits just one percentage point from a 52-week peak.

In the same vein, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.01 registers in the 92nd annual percentile. In other words, short-term options traders have rarely been more put-heavy on FITB during the past year.

Elsewhere on the Street, short sellers have also ramped up their bearish exposure on FITB, with short interest skyrocketing 85.4% during the most recent reporting period. Nevertheless, these pessimistic positions account for just 1.5% of the equity's total available float, representing less than two sessions' worth of pent-up buying demand.

Daily chart of FITB since April 2011


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