Options Trading News

Citigroup rallied off support and saw heavy put activity yesterday, but the strategy behind it was unclear.

C finished the session up 3.75 percent to $25.75, a day after the bank saw its lowest close for 2012. Shares have fallen from above $38 since late March.

More than 193,000 C options traded on the day, almost twice its daily average. Topping that action was a large put spread.

A trader sold 30,000 August 25 puts for $2.04 below the open interest of 31,603 contracts and bought the same number of August 22 puts for the ask price of $1.11. The latter volume was more than 15 times the previous open interest at that strike, so it was new activity.

If the August 25 puts were sold to close a transaction, this is simply a trader rolling the position down to the August 22 strike and taking some profits off the table. But if the puts at both strikes were opening trades, then this is a new credit spread, which would take a maximum profit with C above $25 at expiration. (See our Education section)