Capital One Data Breach Sparks Bearish Options Trading

Personal data from around 100 million Capital One customers was compromised

by Karee Venema

Published on Jul 30, 2019 at 11:08 AM
Updated on Jun 24, 2020 at 10:16 AM

Capital One Financial Corp. (NYSE:COF) stock is spiraling today, down 7% at $90.13 -- set for its worst day since July 2015 -- after the financial firm said it was hacked. Personal data from roughly 100 million customers in the U.S. and Canada was compromised in the security breach, including around 140,000 Social Security numbers and 80,000 linked bank account numbers.

Today's volatile price action has both COF stock and options volume pacing in the 100th annual percentile. By the numbers, around 3.32 million shares and 12,000 options have changed hands, compared to average daily volumes of 2.26 million shares and 7,343 options, respectively.

Diving deeper into COF's options activity, the bulk of the action has occurred on the put side, with 9,300 contracts on the tape. The September 82.50 put is most active, where it looks like speculators may be liquidating positions. Elsewhere, the weekly 8/9 70-strike put is possibly being bought to open, meaning traders are targeting even bigger losses for the bank stock over the next two weeks.

Given Capital One's longer-term gains, some of the buying at this deep out-of-the-money strike may be at the hands of shareholders protecting paper profits. Whatever the reason, short-term volatility expectations on COF have spiked, per the stock's 30-day at-the-money implied volatility (IV), which is up 30.7% today at 26.1% -- in the 74th annual percentile. Plus, the equity's 30-day IV skew of 6.4% registers in the 1st percentile of its 12-month range, meaning call and put options premiums are near parity.

Looking closer at the charts, COF shares are still up almost 20% year-to-date, and closed at a 10-month high above $98 yesterday. The stock's 50-day and 100-day moving averages have served as support in recent months, with the former trendline containing today's pullback.

cof stock daily price chart july 30

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