Volatility in financial stocks, particularly Citigroup and Merrill Lynch, remains very high, according to Rebecca Darst, equity options analyst with TheStreet.com.
"The implied volatility is just very, very high. Citi's implied volatility is up something like 60 percent in the past week," she said Thursday on CNBC. "If you look at the implied volatility charts, if you follow the charts, really the implied volatility development in these leading financials has really picked up in the past seven days. We've seen that most striking in Citi; implied volatility in Citi options is fast approaching twice the historic reading on the stock, so it's very, very expensive to get any kind of insurance against Citi's stock price, and there's a great deal of uncertainty surrounding the fate of the stock."
The situation was similar at Merrill, she said. (See her full comments here)
"In Merrill , we've seen a similar setup; its implied volatility is up about 53 percent in the past week, and we saw a couple of divergent trends yesterday,' she said. "It appeared that traders were selling November $10 puts in Merrill, but buying December $7.50 puts, maybe looking for some stabilization, limited downside this week through the expiration of the contract, but declining into December."
Darst also said options traffic was picking up in retail REITs like Simon Property Group , where options were trading 3 times normal level. She also noted Autozone put open interest was up a third, as traders figured people would be fixing up their old cars rather than buying new ones.
Disclosure information was not available for Darst.