What’s Up In Citigroup?
Here is an example of how we use the Dollar-Weighted
Call/Put (or vice versa). I was looking at our scans of active baskets this
morning and came across the outrageous $309,749 dollar-weighted call volume in Citigroup
(
C |
Quote |
Chart |
News |
PowerRating), versus the anemic ($2,725) dollar-weighted volume in the puts. Clearly,
something BIG was going on in C today. Maybe the institutional buyer is betting
on both a Fed rate cut and some movement on President Bush’s tax cuts.
I asked our analysts what news there was on C and found two First Call stories,
one primarily on fellow banking giant Wells Fargo
(
WFC |
Quote |
Chart |
News |
PowerRating), and the
other on State Street Corp
(
STT |
Quote |
Chart |
News |
PowerRating). In other words, nothing substantial
that would indicate why the January (2002) LEAP 45 — 55 call spread would
trade 13,000 times. As our banking index scans show, the action in C is an
isolated event, as the rest of the banking sector is seeing a more balanced
picture.
When
we see a single issue like C experience such a substantial flow of money into
the calls, we have to believe there might be some good news pending. For traders
who want
to ride the coat tails of this institutional client, they may take a look at buying
the March 55 — 60 bull-call spread for 1 7/8. That would entail buying the
March 55 calls for 3 1/8 and selling the March 60s for 1 1/4. Pretty attractive
risk/reward ratio, and if C finishes above 60 in March, a mere 11% move, the
spread would produce a gain before commissions of 3 1/8. That’s a return of
166%!