By David Russell
Option volume surged 165-fold in Popular (BPOP) yesterday as buyers flocked to the beaten-down Puerto Rican lender.
The largest trade resulted from investors selling the June 2.50 puts to earn income from the company’s rich volatility. Some 2,620 contracts changed hands for $0.35 to $0.45 against open interest of 2,278, according optionMONSTER’s tracking systems.
BPOP rallied 13 percent to $2.56 yesterday. The stock has been consolidating for the last five months after more than doubling between July and October.
The stock rallied 45 minutes into the session despite a lack of news. It may be attracting the attention of value investors because it trades at just 0.54 times book value. Yesterday’s gains follow bullish activity earlier in the month among regional banks such as Regions Financial (RF) and BB&T (BBT).
Selling puts on BPOP allowed the investor to take advantage of the company’s 70 percent implied volatility reading. That’s more than twice the 28 percent level on the SPDR KBW Regional Banking (KRE) exchange-traded fund.
Investors also bought 1,985 April 3 calls on BPOP, most of which priced for $0.10. The shares must rally another 21 percent by expiration for the calls to turn a profit.
BPOP’s loss was wider than expected the last time it published results on Jan. 21 despite lower provisions for bad loans. It hasn’t yet scheduled its next earnings release date.
Disclosure: No positions
Similar Posts:
- Looking for a Summer Rally in Popular
- Bank Fund Targeted for Pullback
- Current Implied Volatility vs. 52 Week Highs of Stress Tested Financial Institutions
- ‘Dribble-Out’ Sale of Taxpayers’ Citigroup Stake Poses Risks
- ‘Dribble-Out’ Sale of Taxpayers’ Citigroup Stake Poses Risks
