Thursday, October 25, 2012

Regions Financial Draws Bullish Play

By David Russell

Regions Financial (RF) ripped higher on bullish technicals yesterday, and the call buyers weren't far behind.

Money rushed into the August 9 contracts, which traded 5,938 times against open interest of 1,671 contracts. Most of large transactions priced for $0.15 to $0.31, according to optionMONSTER's Heat Seeker tracking program. Call buying dominated the session, which was six times busier than usual.

RF rallied 5.5 percent to $7.29 after establishing a new 52-week high of $7.62 earlier in the session. The shares have been gradually squeezed higher in the last month while being held in check below $7. They gapped above that level at the open and quickly made a run for the $7.50-$7.60 range that had served as resistance in the last year.

The holding company has a lower price-to-book ratio than most of its rivals and a relatively high short interest, which represented 11 percent of the float as of Feb. 12. That may be helping the stock outperform other regional banks as measured by the SPDR KBW Regional Banking (KRE) exchange traded fund: RF is up 32 percent in the last three months, compared with a 21 percent gain for that ETF.

RF must rally another 27 percent by August expiration for the calls to turn a profit. Investors also purchased the March 7 calls, April 7 calls and March 8 contracts. Call options overall outnumbered puts by almost 4 to 1 yesterday, further reflecting the bullish sentiment.

Disclosure: No positions

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