Option Trade 
Citigroup Inc (NYSE:C) Puts 
Wednesday, October 14, 2015

**OPTION TRADE: Buy the C Jan 2016 50.000 put (C160115P00050000) at approximately $1.90. Place a pre-determined sell at $4.00.

Note: No protective stop losses added as yet -- but if you wish to do so make it $0.75.

by Ian Harvey

October 14, 2015


Citigroup Inc (NYSE: C), the third biggest U.S. bank by assets, is expected to be hurt by market volatility and low interest rate environment. Chief Financial Officer John Gerspach has already said third-quarter trading revenue, to be released on Thursday, will decline from a year earlier due to increased volatility.

It is expected that the financial sector will struggle to meet the Street’s estimates after the Federal Reserve kept the interest rates unchanged, along with other potential headwinds. Interest rate was expected to increase earlier, but the central bank still has concerns regarding the macro economic growth and inflation.

Since July, financial stocks have underperformed the sector. KWB Bank index is also below the market, despite the increasing margins. Large cap banks including Citigroup, Bank of America, and JP Morgan have been following the same trend. S&P Financial Index tanked 5.6% since the beginning of the year, whereas the S&P 500 index plummeted 2.2%. This denotes that greater volatility in the results is expected in the third quarter.

Citigroup will announce its results, before the opening bell tomorrow. The Street expects that the financial services holding company will report earnings per share (EPS) of $1.28. Earning whisper believes that the company will beat the consensus estimate, as they anticipate EPS to clock in at $1.38. In the same quarter last year, Citigroup thrashed the consensus estimate of $1.12, as it reported $1.15 per share.

Citigroup’s revenue is projected to come in at $18.61 billion. Last year for the same period, the company reported revenue of $18.98 billion, beating the estimate by $0.89 billion.

Street forecasts operating income of $7.13 billion; however, in 3QFY14, the bank reported operating income of $7.25 billion.

Analysts at Morgan Stanley and Barclays have released their sell-side reports showing their concerns for the drop in revenue from commodities, currencies, and fixed income segments in the third quarter.

The Federal Reserve has kept the interest rates unchanged. It is hard to determine whether the banks will face an immediate effect on their net interest margins (NIM), but the future earnings expectations will see a downfall.

Since the beginning of the year, Citigroup stock has tanked more than 6.4%. It has a 52-week high of $60.95 and 52-week low of $46.60. The stock was trading at $51.28 on Monday; at this price the company has a market capitalization of $154 billion. In addition, 3.01 billion shares are floating in the market.

Technical Details

Citigroup Inc. shares, along with others commenced a downward slide in mid-August due to the underlying themes mentioned above. Since then, Citigroup stock has shed more than 10% of its market value and has a market cap of $153.68 billion, as of yesterday’s close. During the relevant time period, Citigroup stock was seen carving all new lows, resulting in a 52-week low of $46.60. Citigroup stock has a 52-week high of $60.95.

Citigroup stock’s latest price trend suggests that an otherwise downward trend is undergoing a slight advancement as markets recover. However, the view is that the rise is purely a minor consolidation before Citigroup stock resumes its downward momentum.

A technical analysis for Citigroup stock based on Tuesday’s closing price of $51.06 suggests that shares will continue to gain, but it is simply minor retraction to the upward trend. After a decline from Citigroup stock’s July 2015 high of $60.89 to its August 2015 low of $47.10, the major price action is contained in a minor consolidation between $47.10 and $53.65, which may take the form of a triangle.

Citigroup stock’s general direction appears down below intermediate to long term averages (50,100 and 200 day moving averages). Failure to overcome last resistance confirmed at $53.65 can transpire a fall below $48.69 to set bearish continuation towards $45.62 and $41.84-$40.65.

Analysts Opinions

Interesting enough, most analysts evaluating Citigroup stock are significantly bullish on the stock’s future outlook. Out of a total of 35 analysts, 30 rate Citigroup stock a Buy, three recommend a Hold, and only two analysts suggest a Sell. Citigroup stock’s 12-month consensus target price is $64.01, presenting a return potential of more than 24% over the stock’s last quoted price.

Harvey’s Options Volatility Indicator


Citigroup stock dropped 0.10% at $51.27 in extended trading yesterday, and based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the C Jan 2016 50.000 put (C160115P00050000) at approximately $1.90. Place a pre-determined sell at $4.00.

Note: No protective stop losses added as yet -- but if you wish to do so make it $0.75.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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