Fifth Third (FITB) investor boosts put volume, expresses bullishness

By Jud Pyle, CFA,

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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%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Options
Referenced Stocks: FITB

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