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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerThe shares of Regions Financial Corporation (NYSE: RF) surged this afternoon after the regional bank said it expects to report a first-quarter profit. In a regulatory filing with the Securities and Exchange Commission (SEC), Chairman and CEO Dowd Ritter attributed the unexpectedly profitable quarter to recent strength in new account openings and customer deposit growth.
If Wall Street seems shocked by the news, it's because analysts were predicting Regions to swallow a quarterly loss of about $290 million, or 42 cents per share, according to Thomson Reuters. Plus, with nearly 5% of the equity's float sold short, it seems that many investors were also betting on the bank to report gloomy earnings.
The upbeat outlook propelled RF to a gain of more than 30% today. Call volume spiked on the suddenly high-flying stock; in the soon-to-expire April series, 29,398 call contracts traded at the newly in-the-money 5 strike, which has 11,604 contracts in open interest.
Meanwhile, the longer-term (and still out-of-the-money) May 7.50 call has seen 16,659 contracts change hands on open interest of just 4,876 contracts. With volume outstripping open interest by a significant margin at both strikes, it's likely that a hefty amount of today's volume consists of newly opened positions.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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