Regions Financial Corporation (NYSE: RF) started today's trading with a resounding thud after announcing a $1.25 billion stock offering. The regional banking issue said it will offer $1 billion in common shares and $250 million in new convertible preferred shares. The proceeds will address roughly half of the $2.5 billion in capital Regions was instructed to raise by the U.S. Treasury Department following its stress test results.
Despite a negative start to the session, RF has since ticked fractionally higher. The security has shed more than 34% of its value in 2009, and it's currently struggling under the weight of resistance from its 32-week moving average. Since 2007, RF has managed to notch just one weekly close above this steadily descending trendline.
Bearish speculators are jumping on RF's stock offering as an opportunity to initiate fresh positions. Within the first 45 minutes of trading, 7,354 contracts flew across the tape on the equity's June 8 put option. This strike currently carries just 753 contracts in open interest, suggesting that the bulk of today's volume consists of newly opened positions.
Digging deeper into the action at this strike, seven blocks of 200 contracts apiece (totaling 1,400 contracts) traded around 10:00 a.m. Eastern time at the ask price of $3.10, suggesting that the puts were purchased. With RF currently trading just above $5 per share, these bearish June 8 positions are already in the money by a comfortable margin.
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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