Citigroup Stock Pops After Warren Buffett Takes Stake

The bank has underperformed the financial sector in the last 12 months

Deputy Editor
May 17, 2022 at 10:05 AM
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Warren Buffett's Berkshire Hathaway (BRK) added 55 million shares of major bank name Citigroup Inc (NYSE:C) to its portfolio, according to a filing revealed after yesterday's close. The purchase, worth approximately $3 billion, helped Citigroup stock add 6% at last check, with the shares trading at $50.36.

Buffett, who also recently took a major stake in Activision Blizzard (ATVI), bought up C following 12 months of underperformance compared to others in the financial sector. Specifically, ahead of today's price action, the equity took a 38% haircut year-over-year, while the Financial Select Sector SPDR Fund (XLF), a diversified fund that covers a variety of industries in the financial realm, was off by 12.2% in the same timeframe. More recently, a series of lower lows dragged Citigroup stock to 18-month lows near $45, with its descending 30-day moving average keeping a lid on breakouts.

Citigroup stock's options pits are bustling with bullish activity following the news. In the first hour of trading, 21,000 calls have been exchanged, which is triple the intraday average. The most popular contract is the January 19, 2024 65 call, followed by the weekly 5/27 48-strike call.

Meanwhile, C's 10-day put/call volume ratio of 0.70 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than all but 3% of readings from the past 12 months. This suggests that, while calls have outpaced puts, there has been a healthier-than-usual appetite for the latter lately.

Now might be a good time to weigh in on C's next move with options. The stock's Schaeffer's Volatility Scorecard (SVS) sits at an 85 out of 100, meaning the security has exceeded option traders' volatility expectations during the past calendar year.



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