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Call seller targets Royal Bank of Canada

Royal Bank of Canada fell on a weak earnings report, and traders apparently doubt that it will rebound quickly.

optionMONSTER's tracking systems detected the sale of about 2,000 June 60 calls for $0.40 to $0.50 against open interest of just 437 contracts. The activity pushed total option volume in the Toronto-based lender to 17 times greater than average.

RY gapped lower and ended Friday's session down 2.62 percent to $58.71 after second-quarter earnings rose less than expected. Management attempted to blame the miss on capital markets, but investors focused on a slowdown in domestic credit growth--apparently a recurring theme among Canadian lenders last week.

The stock had spent most of April attempting to break out to a new all-time high but slipped below its key 50-day moving average in early May. Some investors may consider RY's price action to be consistent with a reversal and now anticipate greater downside.

That was probably on the mind of the call seller, who essentially expressed a belief that the shares will remain below $60 through expiration. (See our Education section)

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

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