Region's Financial: A Good Short Play

Yesterday was another bad day for the banks, as a number of banks post big losses in stock value on the day and a number hit new 52 week lows including Wachovia (WB), Key Bank (KEY), Huntington Bancshares (HBAN), and Suntrust Banks (STI), just to name a few. The overall market remains in a correction with the financials responsible for much of the bad sentiment. 

Region's Puts

Regions Financial (RF) showed up on my radar as there was a large amount of Put activity in the month of July at the $12.50 strike price. The stock itself closed the day yesterday at $12.73 down 7.42%. The volume on the Puts was 14,596 contracts with only 1,316 open interests. Investors definitely feel Regions will decline more over the next month with this large amount of activity at a strike price below the current stock price.

Fortune Calls for Cuts

Fortune ran a story yesterday morning naming a number of banks likely to cut their dividends. Regions Financial was named as one of the banks along with Bank of America (BAC), Wachovia (WB) and Fifth Third (FITB). The earnings expectations for the bank haven’t taken the hit that other banks such as National City (NCC) has taken, but with the possibility of the bank cutting its 11.4% dividend being very likely, buying the Puts or shorting the stock is a good short term trade.

Disclosure: None

Comments

[mpharbold1:]

You would have impressed me if you would have recomended shorting this stock a year ago.

2008 Jun 18 08:58 AM

[Bear Stocks...:]

NCMI, TMX, ARGN, AXL and PACW also appear to be good candidates for short-selling.

2008 Jun 18 10:18 AM

[Dan Jacome:]

If anything, some of these regionals are due for a) a bounce b) a squeeze or c) a takeout.

RF, STI are prime targets for anyone wanting to penetrate the Southeast banking space, which is still growing at a pretty decent clip...I'd be wary of trying to follow the hot money downward -- you could get clipped.

2008 Jun 18 12:40 PM

[jimmy46:]

you short the stock you pay someone the 11% dividend

2008 Jun 18 01:45 PM

[w.large75:]

Check out these shorts instead-- DOG, SDS, and QID--
www.greenfaucet.com/fa...

2008 Jun 18 02:39 PM

[User 200256:]

Funny how all of these guys show up after 70% declines and recommend getting in crowded shorts. These stocks will get walked up in a big way to squeeze out all of the late to the party shorts such as the auther.

2008 Jun 19 11:36 PM

[Bulldogjr:]

Shorting this stock is dangerous as the foreign banks will be on the prowl at these cheap prices. Look for RBC to take a strong look at banks like this in the southeast U.S.

2008 Jun 26 03:16 PM