Citigroup Options (C): Unusual Trading Activity

| June 6, 2012 | 0 Comments

C OptionsOptions in once troubled Citigroup (C) have been showing heavy activity over the past few days.

And today is no different.

Citigroup call options are on the move.

Citigroup has traded in a wide range since the beginning of 2012.  But after moving straight down over the last few weeks, the stock’s now trading near its lows for the year.

However, the broad market is up today, and C is following suit.  The stock’s up almost 4.5% at $26.88 a share and climbing.

And the shares are showing signs of delivering their first back to back up days since April 17th.  As a result, option traders are acting like kids in a candy store.  They started buying calls on the financial services behemoth as soon as the bell rang early this morning.

They clearly don’t want to be late to a potential market rally party!

Option traders have their eyes on two different strikes… specifically the C June $26 and $27 call options.  So far this morning, these options have already traded over 13,000 times.  Well above the normal volume.

According to our tracking system, the average price being paid for the C June $27 calls is $0.75 a piece.  And the C June $26 strike call options are being purchased for around $1.35 per contract.

The important point about these options purchases is that they’re naked (without any corresponding stock or other option).  This gives traders unlimited upside potential if C trades above their corresponding strikes by June expiration.

What’s more, when we see heavy call buying spread across multiple strikes and numerous transactions (not just a single block trade), it’s a good sign sentiment is improving.

In other words, the broad based buying shows that multiple traders have the same feeling about the stock’s upside potential.

Now, if you don’t already know, Citigroup is a global financial services company doing business in more than 160 countries worldwide.

They serve commercial and consumer clients through their regional consumer banking segment.  And they also provide investment banking, treasury, and securities services through their institutional clients group.

So, what’s behind this sudden burst in Citigroup option activity? 

I believe it’s a combination of the banking industry getting beaten down so heavily in May, coupled with some generally good news internally.

In other words, Citigroup shares appear cheap here and the company is now recapitalized and refocused under new management… perfect conditions for a successful turnaround.

And now that Citigroup’s problems have been pretty much cleared up, investors are feeling sufficiently confident to come in and purchase the stock.  It will once again return to its former glory!

Finally, Citigroup’s true earnings power will be once again revealed as its distressed assets slowly run off, eventually creating a catalyst for the stock price to rise.

Bottom line…

It’s obvious a number of option traders think it’s time for Citigroup to break its recent down trend and move to the upside.

What do you think, are these option traders correct?

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.