Bank Stock Enjoys Premarket Pop After Buffett Takes Stake

Analysts and options traders are currently bearish on COF

Jake Scott

Deputy Editor

May 16, 2023 at 9:23 AM

A regulatory filing disclosed Monday shows Warren Buffett's Berkshire Hathaway (BRK.A) took a roughly $954 million stake in Capital One Financial Corp. (NYSE:COF), helping the bank stock rise 6.5% to $94.95 in pre-market trading.

Coming into today, COF was down 23.5% over the last 12 months, but this morning's gains could help the equity overcome its year-to-date breakeven mark. Capital One Financial stock could also move back above its 50-day moving average, a trendline that has loomed overhead since early March.

Leading up to the news, options traders were looking bearish. this is per the equity's 50-day put/call volume ratio of 1.98 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 79% of readings from the past year. This implies options traders have been picking up long puts at a quicker-than-usual pace over the past 10 weeks.

Now could be a good time to weigh in on the security with options. According to Capital One Financial stock's Schaeffer's Volatility Scorecard (SVS) reading of 75 out of 100, the stock tends to outperform volatility expectations.

Analysts were also bearish, with 10 of 17 recommending a tepid "hold" or worse on COF. What's more, the 12-month average target price of 109.38 is a 22.7% premium to last night's close.

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