Financials take another hammering

  Today’s tickers: : C, BAC, HBC, BG & PFG C – Citigroup Inc. – Without a doubt Citi is the leading option’s venue for panicked equity investors today. Options trades are running at a frenzied pace with volume soaring upwards of 200K for Citigroup today amid continued erosion of Citi’s share price. In this unprecedented financial crisis, it appears that the old adage the bigger they are, the harder they fall, still applies as pieces of the former behemoth continue to fall away. Having shelled out $2.7billion, Morgan Stanley will now own 51% of the formerly Citi controlled Smith Barney broker unit, now Morgan Stanley Smith Barney, with the option to acquire the remaining 49% in five years time. Citigroup garnered a much needed $6.5billion of equity capital in return for relinquishing a huge portion of their wealth management business. Its shares continue to recoil as speculation mounts as to what a remolded version of the company will look like. Shares are down 15% to $5.00 while around 200,000 options contracts have crossed the tape by 11am. Around half of this has taken place in the January contract, where options expire in just two more sessions later this week. At-the-money put options at the 5.0 strike have seen most volume with 28,000 lots in action, the price of which has surged from 9 to 42 cents today as investors ponder where Citi’s price will be in just two days – never mind after a re-tune. At the February 4.0 strike investors traded 20,000 puts at the 4.0 strike at a similar 42 cent premium, where the delta or the chance of these puts landing in the money, currently stand at 25%. BAC – Bank of America. – Investors are raising the valid question about BAC’s recent acquisition of Merrill and what benefit it will bring the company in light of Citi’s forced sale of its stake in Salomon Smith Barney. Overall option volume at Bank of America today is a lofty 125,000 contracts of which some 20,000 were traded in one series alone. That volume of puts was initiated by buyers who dominated activity at the January 10 strike where investors paid 44 cents for rights to sell shares at the strike price by Friday’s expiration. Investors would make money if BAC was trading below a share price of $9.56. Investors also sold 10 and 11 strike call options where implied volatility of…