Not Everyone Has Given Up On American Express Company (AXP)

American Express Company (AXP) option volume is at nine times the normal rate


Published on Feb 13, 2015 at 11:13 AM
Updated on Apr 20, 2015 at 5:32 PM

American Express Company (NYSE:AXP) got whacked yesterday, dropping 6.4% after announcing it will end its domestic credit card partnership with Costco Wholesale Corporation (NASDAQ:COST) next year. Today, the shares continue to struggle, last seen 3.1% lower at $78, after earlier touching an annual low of $77.72. Elsewhere, in AXP's options pits, contracts are crossing the tape at nine time the expected mid-morning pace.

Buy-to-open activity has been detected at the February 78 call, as these traders are expecting the stock to gain ground above $78 before the close next Friday, when front-month options expire. To see a profit on their bets, the speculators will need AXP to reach $79.41 (strike plus volume-weighted average price of $1.41).

In the past two weeks, AXP's options pits have been dominated by call buying. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 3.04 is only 2 percentage points from an annual high, meaning traders have shown a greater-than-usual appetite for calls over puts.

Analysts remain skeptical of American Express Company (NYSE:AXP) -- not surprising, given its 12.4% year-over-year decline. Of the 20 brokerage firms covering the shares, 12 rate them a "hold" or worse. What's more, AXP today was hit by price-target cuts from several brokerage firms, including RBC, which sliced its target by $5 to $74 and reiterated an "underperform" rating.

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