Market News

December 9, 2016  Fri 7:47 AM CT

Traders apparently believe that the torried run in banking stocks may be cooling a bit.

Financials have led the post-election rally, with particular strength in the banks, as investors and analysts have speculated these companies will benefit from higher interest rates and looser regulations under the incoming Trump administration. But yesterday our systems detected bearish option positions in several lenders:
 

  • Morgan Stanley: 9,500 January 43 puts were purchased for $1.61 to $1.70 against open interest of 1,674 contracts.
  • PNC Financial: 1,800 December 110 puts were purchased for $0.49 to $0.64 against open interest of 586 contracts.
  • Citizens Financial: 5,000 April 35 calls were sold for $2.70 against open interest of 2,652 contracts.
  • KeyCorp: 3,100 March 20 calls were sold for $0.47 against open interest of 1,207 contracts.


Long puts lock in the price where a stock can be sold, so they make money if shares decline. Investors use them to hedge long positions or to speculate on a drop.

Short calls generate income and lock in the price where a stock must be sold. The trade is usually done in conjunction with long shares in a covered-call strategy, reflecting a belief that gains will be limited through expiration. (See our Education section)

MS rose 2.2 percent to $43.58 yesterday and is up 33 percent in the last three months. The investment bank's next quarterly report is expected in pre-market hours on Jan. 19. Overall option volume in the name was twice its daily average.

PNC rose 1.91 percent to $114.82 yesterday and is up 24 percent in the last three months. The lender is scheduled to announce quarterly results before the market opens on Jan. 13. Overall option volume in PNC was twice its daily average.

KEY rose 0.66 percent to $18.37 yesterday and is up 47 percent in the last three months. The regional bank's next quarterly numbers are scheduled for release in pre-market hours on Jan. 19. Overall option volume in the name was twice its daily average.

CFG rose 1.37 percent to $35.54 yesterday and is up 41 percent in the last three months. The regional lender's earnings results are expected to come out before the market opens on Jan. 30. Overall option volume in CFG was 10 times greater than average.

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