Fifth Third Bancorp (NASDAQ: FITB )
did not announce any news after the holiday weekend, but the stock
is outperforming the market so far on the day. The company's
earnings figures are due on July 22 before the market opens and
analysts estimate earnings of two cents a share. Options action
during morning trading on Tuesday suggests at least one investor
could be betting on limited downside during the near term and
expressed this sentiment by selling puts.
Around 11:16 a.m. EST, a block of 5,755 front-month July 12 puts
changed hands for 32 cents per contract versus current open
interest of 13,000 contracts. Around the same time, a block of
6,997 August 11 puts crossed the tape for an average price of 41
cents per contract and a block of 11,625 August 10 puts changed
hands for 22 cents per contract. The August 11-strike and 10-strike
puts are home to current open interest of roughly 1,500 contracts,
indicating the investor most likely traded the back-month options
to open and closed the front-month position. It looks like the
investor bought to close the July 12 puts and simultaneously sold
both strikes in August to open short put positions in August. Given
all of the different contract sizes, this trade was a net credit of
$358,467 to roll the risk out to August.
At August expiration, this put seller will make their maximum
profit if FITB shares are trading higher than $11, because all of
the puts they are short expire worthless. On the other hand, below
11, the trader has the equivalent exposure of 699,700 shares of
stock, and below $10 another 1,162,500.
Implied volatility of the August 10 puts is 62% and the August
11 puts have an implied volatility of 55% compared to the stock's
30-day historical volatility of 50%.