Today’s tickers: FITB, HRB, GM, SAP, C, FTR, FHN & INTC
FITB – Fifth Third Bank – Now that Fifth Third has requested a $3.4 billion loan from the government as part of their $250 billion giveaway, investors – or possibly short sellers – have plowed back into the stock today sending shares 16.2% higher at $9.39. Option-related activity paints a more interesting picture. At the November 10 strike, it appears that sellers of puts might be taking profits since this series is the most populated in the ticker. At the 7.5 and 5.0 strikes, investors are getting long of puts on today’s relief. The December contract is again busy on put activity at both 5.0 and 10 strike, but most have traded to the middle of the market. In the January contract it appears that one investor is more optimistic that the worst of the news will be over in the New Year. The action suggests a credit put spread at the 5.0/7.5 strikes with the higher strike sold at a premium of 2.0 against the insurance of the 5.0 strike at 1.30. The resultant 70 cent credit goes to the investor in the event the shares are higher than 7.5 at expiration with a maximum loss of 1.80 at or below the 5.0 strike in the event the situation becomes graver.
HRB – H&R Block – Three weeks ago when shares in tax accountant H&R Block were trading as high as $19.60, an investor bought some 10,000 November 20 strike puts at a premium of 1.75. Today shares are trading at $15.70 making these puts even deeper in-the-money and our market scanning tools have picked up what looks like a calendar roll out of this position and into the January 17.5 strike. The investor looks to be taking profit on the initial put option position with today’s premium of 4.30 and rolling down the strike to pay 3.40 for more protection should the prospect for shares keep looking bleak. The investor is already buying in-the-money puts and the premium today already contains an intrinsic amount of $2.05 given where shares are trading. Despite the fact that implied volatility reached its maximum at 87.8% when the initial put protection was bought, the trader still benefits from the decline in the share price. Today’s implied volatility stands at 72.2%.
GM – General Motors – With the auto sector set post its most dismal performance in many years, stories about GM approaching the US treasury to help fund a merger with Chrysler are popping up. Shares in GM are lower by 6.9% at $5.54 while options activity doesn’t really reveal much today. With implied volatility on the options running at 228% options premiums are pretty high. November 7.0 strike puts appear to have been sold while there was good two-way traffic at the 8.0 strike. The same month 10 strike calls were bought between 7-16 cents while there was also a heavy flow between buyers and sellers at the 7.0 strike.
SAP – SAP ADRs – German software services provider SAP are lower and we’re unclear whether this is related to the German stock market performance or news of the closure of its domestic data processing center. Either way, the share price has lost 6.5% at $30.50 and option traders have been stealthy with their activity. In the December contract the 30 and 35 strikes were active with what might be a put spread being initiated for a net debit of 2.90 given the prices involved today. The investor would break even at a share price of $27.10 at expiration if the share price continues to decline. Meanwhile indications that the share price would soon stabilize were apparent by the activity of sellers of November 25 strike puts at a premium of 1.3.
C – Citigroup Inc. – Our most actively traded option scanner sensed healthy activity in Citi options today. The put/call ratio of 0.33 indicates far more call volume. With shares now higher at $12.25 we believe December 12.5/15 call spreads are being put on traders’ books at a premium of around 84 cents. It also appears that investors are looking for a bigger jump as they make the same bets higher up at the 22.5/25 calls. Meanwhile the 30 strike calls have been sold at less than 5 cents, likely in related funding activity. On the put side the December 7.5 strike was sold in favor of the 12.5 put, which was bought at 1.65. The January 10 strike put appears to have been bought at 1.33 indicating that some pessimists are still looking for more share price downside at Citi.
FTR – Frontier Communication Corp. – An investor appears to have sold way out-of-the-money calls for just one penny today at the January 12.5 strike on volume of 5,000 lots. Meantime, the 10 strike puts were purchased at a 2.95 premium. The shares are 1.7% higher today at $7.84 and so the puts contain around 2.16 of intrinsic value.
FHN – First Horizon National Corp. – With a 15% rally in the price of its shares to $9.90 it appears that a bullish option investor may have sold around 6,000 puts in the November contract at the 10.0 strike for a premium of 1.15. If that’s the case the investor will lose money below a share price of $8.85. The volume is curious to us since it exceeds current open interest on the option series of 2,778 contracts. The investor hopes that the rally will continue for this stock.
INTC – Intel Corp. – Shares of Intel are 2% to the better today and are trading at $14.55. Its options appear on our most actively traded scanner today, with the most popular series by far found at the December 15 strike where around 33,000 lots have traded at around 1.10 premium. The picture is mixed but slightly higher volume on the ask side indicating that on balance investors are looking for Intel’s share price to recover. The activity today is notable since open interest at the strike price is currently limited to just above 5,000 contracts.
