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Stocks are getting pummeled today on news that retail sales dropped more than twice as much as was forecast in December. The health of the banking sector came into focus again on reports from Morgan Stanley that HSBC may need to raise $30 billion in capital and halve its dividend to survive, and that Deutsche Bank lost more than $6 billion last quarter. On top of that, President-elect Obama’s pick for Treasury Secretary, Timothy Geithner, apparently had some problems with unpaid taxes and the immigration status of a former housekeeper. That stirred up concerns about the next administration’s ability to deliver quickly on an economic stimulus package. About the only green on the screen today is the VIX, the CBOE’s volatility index, which bounced up to 50% today on the market selloff.
Citigroup (C), one of the more popular stocks in the contest, is getting crushed again today, down 22% at the time of this writing. It scheduled its earnings report for this Friday, six days ahead of schedule, and is expected to have another multi-billion dollar loss, its fifth in a row. Trading in C options has exploded in the past couple of days, with twice as much volume as usual. The January 4 and 5 strike puts, and the 5 strike calls are trading very heavily, even with expiration two days away. Implied volatility is higher as well. At this point, it’s anyone’s guess where C might go. The fact that the January 2.50 strike puts are still worth .03 indicates that someone out there thinks that the stock could drop to that level by the end of the week. Yikes. For all you who are long C, the Jan 7.50 calls are worth .03 also. Sorry, but that’s the only comforting idea that I had.
Tom Preston
thinkorswim, Inc.
Member FINRA/SIPC/NFA
thinkorswim, Inc. and its registered employee, Tom Preston, do not solicit or recommend any form of trading in the individual stocks (or their derivatives) mentioned above. Please do careful, independent research before investing any money as well as weigh the possible consequences on your particular financial situation before doing so. The risk of loss may be substantial.
