Options Brief: CVB Financial (CVBF)

CVBF – CVB Financial Corp. – News overnight that the west-coast mortgage lender received a subpoena from the SEC asking about how it handles troubled loans has sent the share price down more than 20% on Tuesday to $8.05. Its options have been relatively busy also but the put action option smacks of a contrarian play in a hope that the news is fully discounted or that an investor suspects no wrongdoing by the bank. Investors appear to have written put options expiring in both September and December expirations using the $7.50 strike price implying rising losses on account of a further 6.8% share price decline. Even then the writers are bringing on board elevated premiums courtesy of a 35% jump in options implied volatility. The cost of insuring against a long stock position from a decline beneath $7.50 before year end has risen to $1.00 today implying a break-even point of $6.50 for a buyer. Today’s selling pressure assumes that the bad news will likely fade sooner rather than later.

About Andrew Wilkinson 1023 Articles

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

Be the first to comment

Leave a Reply

Your email address will not be published.