Wednesday, April 21, 2010

"Citigroup Options Become Crowd Favorite" (C)

The stock is at $4.91 after getting as low as $4.82 earlier today.
From Reuters via the New York Times:
There are active names in the options market and then there is Citigroup Inc.

The New York-based bank has dominated options activity more than any other single equity option this past week as many investors bet its shares would keep rising.

It is the most actively traded single stock equity option this year so far and was the busiest in 2009 as well, according to the Options Clearing Corp.

"Considering how the general option volume has been light, some brokers are saying 'Citi option volume is paying the bills,'" said Henry Schwartz, president of option analytics firm Trade Alert.


Year-to-date Citi option volume as of Monday is 53.3 million contracts -- 7.8 percent of the total single-stock option volume so far, said Schwartz.

According to Trade Alert data, current open interest in Citi is 13 million call options more than twice the number of put options, for a total of 18.6 million contracts.

That's 11.4 percent of the total single-stock open interest or the number of existing positions held by investors. The next largest is Bank of America with 9.6 million open contracts -- less than half the Citi level, Schwartz said.

Citi's shares were at $4.97 on Tuesday after bottoming out just under $1 13 months ago. The stock is up nearly 50 percent over the past 12 weeks and investors see it going higher. Its call option open interest has outpaced put open options and has one of its more bullish readings in the last 12 months as volume has exploded.

Ryan Detrick, senior technical strategist at options market research firm Schaeffer's Investment Research said the current put-to-call open interest ratio stands at 0.57 for Citigroup.

That low ratio suggests more bullish call options have been traded relative to bearish put options in the first three expiration months of May, June and September, he said.

"This indicates that short-term option traders are betting that Citigroup will begin to outperform in the near term," Detrick said.


A lot of the trading involves the $5 line in both puts and calls although it has been skewed to the call side, said TD Ameritrade chief derivatives strategist Joe Kinahan.

The reason is twofold he said: For one, people are hedging their stock positions with options due to the recent run-up in shares.

The other reason is certain funds cannot trade stocks that are under $5. "There is speculative option play that when Citi breaks $5 convincingly, there will be new money that will enter the market purchasing the stock. And in real dollar terms, the premiums on Citi options are very low," Kinahan said....MORE

From MarketBeat comes the seven day chart:

Citigroup Shares: Struggling to Summit Mt. $5


April 20: "Citigroup Shares: Battling the $5 Barrier, Again" (C)

April 19: "Citigroup long-term options (C)"

Apr. 7
"Citigroup: The Case for Continued Growth" (C)

Mar. 29
"AN INTERVIEW WITH BRUCE BERKOWITZ: Why the Fairholme founder finds AIG, Bank of America and Citi very attractive now." (AIG; BAC; C)

Mar. 26
"Sandler O’Neill on Citigroup: Shares Underowned by Institutions" (C)
Mar. 9

"Citigroup: ‘Shares no Longer Toxic?’ and Smart Money Buying?" (C; AIG; FNM; FRE)
Mar. 23
"Soros’ Citigroup Bet: Is He in the Money Yet?" (C)

Mar. 22
"Bove on Citigroup: Buy" (C)

Mar. 19
"Citi-Bull Sheds Just Under a Quarter Million Put Options" (C)
Mar. 11
"Citigroup CEO Pandit Expected to Say Citicorp Could Earn $20 Billion By 2012" (C)

Mar. 9
Citi Up 7% on Treasury’s Exit: Should You Buy? (C)

Mar. 10
Who Scores Big on a Move in Citigroup? John Paulson, Bruce Berkowitz, George Soros; the usual suspects

Mar. 10
"Citigroup's Stock Likely to Keep Climbing: Bove" (C)