Unusual Option Activity: UBS Group (UBS)

Swiss bank UBS Group (UBS) soared over 50 percent last year, coming off extremely low valuations. One trader is betting on a pullback in shares in the coming months.

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  • That’s based on the May 17, 2024 $25 puts. With 132 days until expiration, 11,402 contracts traded compared to a prior open interest of 200, for a 57-fold rise in volume on the trade. The buyer of the puts paid $0.60 to make the bearish bet.

    UBS shares recently traded for just over $29, so the stock would need to drop by $4, or 14 percent, for the option to move in-the-money.

    Such a move is possible. The bank currently trades at a 15 percent premium to its book value, a conservative measure of the company’s book of loans.

    The bank’s profitability has varied, but results have been solid recently. Revenues jumped 39 percent last year, and the banks’ strong price gain has pushed it up to 19 times forward earnings. That’s also pushed the bank’s dividend down to 1.8 percent.

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  • Action to take: Shares are starting to come down after hitting a 52-week high at the end of last year. There may be further downside in the weeks ahead, so interested investors may want to wait for signs the selloff is over.

    For traders, the May $25 puts have plenty of time to play out, and may see mid-double-digit profits within the space of a few weeks, rather than months.

    Traders could also benefit from any fears hitting the banking sector in the next few months with these put options, making them a worthwhile speculation now.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any companies mentioned in this article.

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