Region's Financial: A Good Short Play

Jun.18.08 | About: Regions Financial (RF)

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 (NASDAQ:WB), Key Bank (NYSE:KEY), Huntington Bancshares (NASDAQ:HBAN), and Suntrust Banks (NYSE: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 (NYSE: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 (NYSE:BAC), Wachovia (WB) and Fifth Third (NASDAQ: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