Unusual Options Activity: Citigroup (C)

Wall Street megabank Citigroup (C) is up 27% over the past year, just slightly ahead of the overall stock market. One trader sees a potential pullback in shares in the coming weeks.

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  • That’s based on the May 10 $60 puts. With 24 days until expiration, 4,480 contracts traded compared to a prior open interest of 107, for a 42-fold rise in volume on the trade. The buyer of the puts paid $1.70 to make the bearish bet.

    Citigroup shares recently traded for just under $61, meaning the stock would need to decline less than 2% for the option to move in-the-money. Shares are near their 52-week high of $63.90.

    While the stock has had a good run lately, there may still be more room to run after a pullback.

    That’s because shares are still inexpensive at 10 times forward earnings. And Citigroup still trades at a 40% discount to its book value.

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  • Action to take: Shares are coming off overbought conditions in the short-term, which could be setting up for another leg higher for shares. Investors may want to buy a partial stake now and use any pullback to add to the position.

    At current prices, Citigroup pays a 3.5% dividend.

    For traders, the May $60 puts may have some short-term, mid-double-digit upside. After that, traders may want to play the longer term uptrend with a trade like the June $65 calls, last going for about $1.25.


    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 company mentioned in this article.

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