Friday, June 13, 2008

one move i'm making monday morning: buying wb puts

bad news is brewing/spreading for regional and super-regional banks this afternoon -- despite a modest gain for the S&P in afternoon trading, and limited downside for the Financial Select Sector SPDR (XLF), the Regional Bank HOLDRs (RKH) set a fresh 52-week low today with its ominous dip below the $100 mark.

option traders seemed to hold a special sense of doom and enervation for wb. shares tumbled 8.7% to set a new 52-week low at $17.62, precipitated by this morning's news out of california savings & loan dsl of a ninefold rise in bad loans for the month of may.

this apparently exacerbated concerns about the state of wb's own ARM exposure, which coupled with the sense of dire doldrums among all regional banks, seems to have culminated in this ominous put activity. implied volatility in all wb options has spiked nearly 54% on the news -- as the market now perceives twice as much risk to wb's share price over the next 30 days than they have shown historically. this hefty risk perception is playing out in fresh buying of out-of-the-money puts at the june 17.50 and july 15 put strikes.

position: none, yet

No comments: