Comerica Inc. (NYSE: CMA )
did not announce any news on Tuesday to account for the
underperformance in the stock compared to the broad-market. But
given that the banking sector as a whole is down more than the rest
of the market, the CMA move seems to make sense. Options action in
the puts today suggested that at least one investor seems to be
betting that downside could continue through August expiration.
At around 1:08 p.m. EST, 7,500 of the August 37.50-32.50 put
spreads traded. The 37.50 puts traded for $2.50 per contract and
the 32.50 puts traded for 80 cents per contract. The investor
purchased this spread and paid a net premium of $1.70 per spread,
or $1.27 million in total. But the investor did another trade to
fund the put spread purchase. At the same time, we see that 5,000
of the July 40 puts were sold for $3.
The open interest of the August 37.50 puts is 180 contracts,
while the August 32.50 puts have an open interest of just one
contract. This suggests that the August spread was bought to open.
The open interest of the July 40 puts is more than 10,000
contracts. So what we might have happening here is an investor is
selling to close the July 40 puts, and then buying the August put
spread. This would maintain some bearish exposure, but not nearly
as much because the August put spread has a delta of less than 30,
compared to 80 for the July puts.
One final thing to consider with this trade is that CMA has
confirmed that they will report earnings before the open on July
21. That date will be after July options expire. So by selling the
July puts and buying the August spread, the investor has sold the
options that expire prior to expiration, and have a new August
position that will be around to benefit from the catalyst of the