Unusual Options Activity: Arbor Realty Trust (ABR)

Shares of mortgage REIT Arbor Realty Trust (ABR) have shed about 7 percent of their value in the past year. One trader sees the potential for shares to drop even further.

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  • That’s based on the January 2024 $10 puts. With 533 days until expiration, 7,631 contracts traded compared to a prior open interest of 129, for a 59-fold rise in volume on the trade. The buyer of the puts paid $0.95 to make the bearish bet.

    Shares recently traded around $15, so they would need to shed a little over one-third of their value for the put options to move in-the-money. And shares would have to break under their recent 52-week low near $12.

    The company has held up well in the past year, but rising interest rates and a slowing housing sector could weigh on shares. The company grew earnings by 7 percent last year, even as revenue slid by nearly 9 percent.

    Action to take: As a REIT, shares look attractive with a 9.2 percent yield here. However, that yield will fluctuate with the REIT’s earnings, and is likely on track for cuts in the coming quarters. Plus, shares still trade at a 30 percent premium to their book value, so investors should stay away for now.

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  • For traders, the put options are an inexpensive way to bet on some market downside in the coming months. And with such a long time to play out, they may even benefit should the housing market deteriorate into 2023. Traders should look for mid-double-digit profits.


    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 of the companies mentioned in this article.