Bears see dim future for SunTrust

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SunTrust Banks is getting hammered after an abortive rally, and now the bears are piling in.

optionMONSTER's Depth Charge tracking program detected the purchase of about 10,000 November 24 puts for $0.95 to $1 and the sale of an equal number of November 26 calls for $1, resulting in a net cost of about zero. Volume was more than 4 times open interest in both strikes.

STI STI fell 4.87 percent to $24.34 in morning trading and is down 10 percent in the last three sessions. It's been falling along with other U.S. banks as investors worry about uncertainty surrounding foreclosures and as the sector continues to grapple with a deleveraging economy.

The SPDR KBW Bank exchange-traded fund ( KBE ) is down 3.7 percent in the last week, compared with a 1.7 percent drop for the broader financial sector. Recently, the strength in the financial sector has shifted to non-banks such as property & casualty insurers like Allstate and Chubb, financial guarantors such as MBIA and Ambac Financial, and credit-card issuers such as MasterCard.

The trade on STI will simulate a short position in the stock and produce significant leverage if shares fall below $24. The position will lose money above $26.

The company's next earnings release is scheduled for the premarket on Oct. 21.

The bearish trade pushed overall option volume in the stock to 5 times greater than average, according to the Depth Charge.

(Chart courtesy of tradeMONSTER)



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This article appears in: Investing , Options

Referenced Stocks: ABK , ALL , CB , KBE , MA , MBI , STI , XLF

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