TFSL – TFS Financial Corp. – Shares of the holding company for firms engaged in retail consumer banking fell as much as 21.06%, the biggest price decline since its public listing in 2007, to touch down at an intraday- and new 52-week low of $9.82. Hemorrhaging in TFSL’s shares commenced on news it stopped paying dividends and suspended share buybacks due to concerns at the Office of Thrift Supervision regarding the firm’s home equity line of credit portfolio. Investors expecting shares to continue to decline ahead of October expiration purchased approximately 2,500 now in-the-money puts at the October $10 strike for an average premium of $0.625 per contract. Put buyers make money if TFSL’s shares decline another 4.5% off today’s low of $9.82 to breach the average breakeven point on the downside at $9.375 by expiration day. More than 4,800 puts changed hands at the October $10 strike out of the stock’s total volume of 5,490 contracts exchanged by 12:45 pm ET. Overall options volume of 5,490 is more than 3.6 times greater than previously existing overall open interest on TFSL of 1,522 lots. The demand for options on the stock coupled with rising uncertainty pushed options implied volatility on TFSL 65.3% higher to 36.43% by 12:50 pm ET. Finally, some contrarians may be selling October $10 strike puts 1,700 times to pocket available premium of $0.625 each. Put sellers may expect shares to edge up over $10.00 by expiration day, but are happy to have shares of the stock put to them if that does not happen.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.
Visit: Interactive Brokers