Light relief for Marshall & Ilsley as investors sell puts

Today’s tickers: : MI, WFC, C, BAC, EL, TRA, CY & FXI MI – Marshall & Ilsley - Shares of the financial service provider are declining, and news of their quarterly loss of $403.9million and dramatic slash in dividends payments from $0.32 to just one penny, only exacerbated share price erosion. Options of MI have been actively traded today, with overall volume of 30,680 contracts versus MI’s existing open interest of 71,973. It appears that one investor took the opportunity to close an already established put position when he sold 1,400 contracts at 5.20. The options were initially purchased on July 24, 2008, for 2.20 each when MI shares were trading at $15.02, aloft of today’s depressing price of just $7.50. Elsewhere, it appears that an investor sold 5,615 puts at 1.15 in the February contract at the 7.5 strike, indicating that he believes shares won’t dip below $6.35. WFC – Wells Fargo – In the wake of the devastation of the largest banks, such as Citigroup and Bank of America, shares at Wells Fargo & Company seem to be following suit. Its share price has eroded this week by approximately 30%, as it fell from $24.80 to roughly $17.50 by early afternoon today, posting a new 52-week low on the way. While WFC has heavy options volume overall of 335,000 contracts, many investors seeing this ugly decline in its share price have sought large amounts of protection by buying heavily into puts at the April 10 strike. So far volume at the strike has reached 48,000 contracts. Bearish buyers are shelling out 1.65 per contract yielding a break-even at expiration of $8.35. The size of positions being taken today by investors far outweighs the existing number of open positions of 9,313 puts. Option implied volatility is 5% higher at 159% adding to the cost of options premium. 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…