Volatility lower at Citi and BoA – but it’s still not party-time

Today’s tickers: : C, BAC, EL, TRA, CY & FXI C – Citigroup Inc. – It’s options expiration day, which means lots of action for investors pricing the 4.0 strike in the January contract. Shares in Citi are so far reacting positively to the placement of the axe right though the heart of its divisions and are trading at $4.05. Just for kicks, we’re watching the straddle trading, which is our barometer of where traders expect to see shares settle later today. Currently the call and put premiums combined at 32 cents predict that shares will settle between $3.68 and $4.32 today. Time value is eroding by the minute! In today’s trading of the February contract it appears that investors are buying 6.0 strike calls in exchange for 7.0 and 8.0 strikes. They also seem to be selling out of 3.0 and 4.0 strike puts. Don’t be confused by options sales today, which might be less driven by directional traders as it is by volatility sellers. Overall implied volatility is off 15% to 178% on the contracts ahead of the weekend. We also think we note some back spreading in the March calls between 6.0 and 9.0 strikes where investors seem to be taking a net credit from the sale of the lower strike and limiting risk with purchase at higher strikes. BAC – Bank of America. – Bank of America Corp, having just received $20 billion in TARP funds from the U.S. government, instilled confidence in the North Carolina based BAC, and drove share price higher and option implied volatility drastically lower from 211% yesterday to 158% today. Investors priced the 10 strike call expiring in February yesterday at 1.36, but this morning a pessimistic option trader sold more than 10,000 contracts at just 85 cents after the first half hour of trading, undermining confidence in the nascent share price recovery. Thus, it appears as though the sense of confidence felt by the $20 billion injection was easily shaken in these highly uncertain times for the feeble banking industry. By late morning, the 10 strike calls expiring in February are trading lower still at 60 cents on hefty volume of 28,500 lots as BAC teeters just above yesterday’s weakest price at $7.52. EL – Estee Lauder. – With brands recognized around the globe, Estee Lauder, manufacturer and marketer of quality skin care, makeup, fragrance, and hair care products, is feeling the pressure of poorer…