Put Volume Peaks as Deutsche Bank Plummets

DB is pacing toward its worst monthly loss since Brexit

by Karee Venema

Published on May 31, 2018 at 2:53 PM

U.S.-listed shares of Deutsche Bank AG (NYSE:DB) are selling off today, on news of a damning report by the Federal Reserve. And while the bank stock is barreling toward its lowest close in nearly two years, options traders are bracing for even bigger losses.

With roughly 90 minutes left in today's trading, 64,051 puts have been traded in DB's options pits -- 10 times what's typically seen at this point in the session, and volume at a 12-month peak. Most active is the August 7 put, where a 10,000-contract block was likely bought to open, and could be tied to stock, according to Trade-Alert.

However, the 10-strike put seems to be most popular with options traders. More specifically, it looks like new positions are being purchased at this strike in the weekly 6/8, June, July, and August series of options. If this is the case, the goal is for DB stock to sink into single digits over the next few months.

More broadly, put buyers have been ramping up their exposure to DB stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.77 ranks in the 85th annual percentile. While the ratio indicates long calls have outweighed puts on an absolute basis, the elevated ranking means the rate of put buying has been quicker than usual.

It's getting pricey for put traders to buy premium, too. While the stock's 30-day at-the-money implied volatility of 51.9% -- a 52-week peak -- shows near-term options are relatively expensive, historically speaking, its 30-day implied volatility skew of 21.9% ranks in the 98th annual percentile. In other words, puts are pricing in higher volatility expectations, compared to their call counterparts.

Looking at the charts, DB stock has shed nearly half its value since a late-January rejection at the round $20 level. Today, the financial shares are down 6.9% to trade at $10.78 -- earlier hitting a 20-month low of $10.57, and pacing toward its worst month since June 2016. Weighing on the equity is a Wall Street Journal report that indicated the Federal Reserve slapped a "troubled condition" status on the German lender's U.S. operations last year, one of the central bank's lowest rankings.

db stock daily chart may 31


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