Tuesday, December 15, 2009

Citibank: Massive Number of Puts Traded Ahead of Abu-Dhabi Lawsuit, 1.2M January Puts

Abu Dhabi Investment Authority is seeking to end an agreement to buy the bank’s stock for $31.83 to $37.24 a piece (about 10 times its current price), or to receive more than $4 billion in damages if the deal is upheld.

They have filed a claim alleging “fraudulent misrepresentations” tied to its agreement to buy the common stock, Citigroup.

Coincidence or not (not!), the number of puts traded in Citibank has been massive. I mentioned this on our skype trading session today. Take a look:

December options:

Those 137k Dec 4 sold incuded mine. They were exited for 125% profit and half the proceeds were used to buy a January strangle. There are an astounding 624k 4 puts alone.

January 2010 options:

Most of the puts were bought after 3PM, which is when was trading them. That is why I noticed the volume spike. There are 495k 4 puts in January, 399k 5 puts, and another 360k 2.50 puts, for a total of 1.25M puts! Somebody is about to get very rich.

The strangle bought was the 2.50 puts at $0.02 and 4 calls. This may be about to get very interesting!

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