C Trade Update

by Dan April 18, 2011 10:31 am • Commentary

Last Thursday I suggested taking a bearish shot into Citi’s earnings by Buying the C Apr21 weekly 4.5 Puts for .13…..well the earnings were out this morning and the stock is up (not really sure why) but as JPM and BAC before it I would expect the stock to sell off and close poorly….I am selling those Puts and will look to roll something longer dated as I did in BAC.

-Puts can be sold for .10, take small loss and I think you are safe to just short the stock here as the options are getting increasingly difficult to trade with the .50 strikes….


Citigroup (stock 4.44) reports earnings Monday morning pre-open.

-Implied move about 4% vs the avg move over the last 8 qtrs of about 5.25%.

-Based on JPM‘s report, I think safe to assume that you will not get better results from C than you got from JPM, which is down almost 3%  in a day since what wall street analysts thought was a very good showing.

-stock is down ~6% ytd under-performing JPM up ~7% and SPX which is up ~4.25% ytd.

–Wall Street analysts fairly mixed on the name with 16 buys, 9 holds and 3 sells, but average price target is about 5.50!

-Technically a break below 4.40 could have the stock down towards 4.00 if the commentary is less than stellar.


C (stock ref 4.44) BUY the Apr21 weekly 4.5 Put for .13

Break-even on Next Fri Expiration:

Downside: stock 4.37 or lower u make money, that is down 1.5%.  stock btwn 4.37 and 4.50 can lose up to .13.  Worst Case stock above 4.5 and you lose the .13 premium you paid.


If JPM can’t cut it, then C won’t either, and if you are Bearish like me and looking for low premium, dollar cheap option ways to express this view into events this is one way to do it……That said, C is a very fine company in the midst of a phenomenal turnaround from the brink.  Full Disclosure: I bank with them and do Business with them, this is a very short term play into earnings.