Deutsche Bank AG (USA) (DB) Options Bears Eye Record Lows

Deutsche Bank AG (USA) (NYSE:DB) is higher on news of the $1.2 billion sale of its insurance division

by Karee Venema

Published on Sep 28, 2016 at 11:15 AM

Options volume is accelerated once again on Deutsche Bank AG (USA) (NYSE:DB), as shares of the embattled lender bounce off recent lows on news of a $1.2 billion sale of its U.K.-based insurance division, Abbey Life. At last check, DB stock was up 1% at $12.04, and options volume was running at three times what's typically seen at this point in the day. Plus, with 26,000 DB options on the tape, total volume is in the 99th percentile of its annual intraday range.

Puts have the lead over calls by a roughly 2-to-margin this morning, but this only echoes the wider trend seen in DB's options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 43,769 puts on DB in the past 10 sessions, compared to 13,559 calls. What's more, the resultant put/call volume ratio of 3.23 ranks in the 60th annual percentile, meaning puts have been bought to open over calls at a faster-than-usual clip.

This put bias is also seen in the stock's top-heavy front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 1.95. In other words, near-the-money puts nearly double calls among options expiring in three months or less.

Drilling down on the front-month series, peak put open interest is found at the October 10 strike, where nearly 32,600 contracts reside. According to the major options exchanges, the bulk of this activity in recent months has been of the buy-to-open kind, meaning put buyers expect DB to be sitting in single-digit territory when the options expire at the close on Friday, Oct. 21.

Looking at the charts, the lowest the shares of Deutsche Bank AG (USA) (NYSE:DB) have ever traded was $11.23 -- which they hit on Monday, in the wake of a damning report indicating the German government was not willing to bail out the big bank. DB CEO John Cryan has since replied in an interview that "state aid is not an issue." While this may be helping to fuel today's bounce, DB stock remains 54% lower on a year-over-year basis.

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