Bulls Target Banking Stock Amid Bearish CEO Comments

Call volume is running in the 99th percentile of its annual range

Deputy Editor
May 26, 2020 at 2:34 PM
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Bearish comments from German financial name Deutsche Bank AG (NYSE:DB) have attracted the attention of options traders today, and sent the stock surging -- up 12.6% at $8.24 at last check. Specifically, the company's CEO Christian Sewing said during an online conference earlier today that markets are too optimistic about the economy's recovery from the coronavirus crisis, and that there will likely be more uncertainty ahead, despite stocks' rebound off their March lows. He did add, however, that the "positive momentum" of the investment banking sector continued on in April and May. 

Circling back to the wild options activity surrounding DB today, so far, 29,000 calls and 11,000 puts have crossed the tape -- seven times the intraday average, with call volume running in the 99th percentile of its annual range. Interestingly, the January 2022 15-strike and 12-strike calls are the most popular, with positions being opened at the latter. This suggests these traders are speculating on more upside for DB in the long-term. 

This burst of bullish bets is unusual, with puts looking like the popular choice among options traders during the past 10 weeks. This is per DB's 50-day put/call volume ratio of 2.07 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 74th percentile of its annual range. 

Shorts are still piling on too, with short interest up 4.4% in the last two reporting periods. The 78.86 million shares sold short represent 4.3% of DB's available float, and would take almost two weeks to cover at the security's average daily pace of trading. This leaves plenty of room for a short squeeze, should some of these bears begin to hit the exits. 

A final look at the charts shows DB obliterating its 320-day moving average today for the first time since early March. The security is also pacing for its highest close in nearly two months. Furthermore, the stock knocked out recent pressure at the 200-day moving average, which coincides with its year-to-date break-even. For the month, DB is up 11.3%. 

 

 

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