Citigroup Inc. (NYSE: C) shares are lower today, dragged down by the overall market. However, it has been reported that CEO Vikram Pandit and another big shot at C have recently purchased a combined one million shares of the bank's stock. These guys may just be making a big show of confidence, but it is still roughly $9M on the line in these transactions. If you think that insider buying means the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on C.C opened this morning at $9.76. So far today the stock has hit a low of $8.79 and a high of $10.11. As of 1:55, C is trading at $9.19, down 0.26 (-2.8%). The chart for C looks bearish and S&P gives C a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $5 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 10.1% return in just five weeks as long as C is above $5 at December expiration. Citi would have to fall by more than 45% before we would start to lose money. Learn more about this type of trade here.
C hasn't been below $8 at all in the past year and has shown support around $8.25 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in C.
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Corrections, seasonality and Santa Claus
Reader Comments (Page 1 of 1)
11-21-2008 @ 9:00PM
Henry said...
Citi closed at 3.77 today. So much for your expert analysis.
12-07-2008 @ 1:33PM
tom said...
Even Citigroup CEO Vikram Pandit is buying C stock acordding to what he learned from histocky.com ... :)
Like me...