Tuesday, February 8, 2011

WFC trades 2X its daily average

Wells Fargo (WFC) traded 129,121 options today, 94,688 calls and 34,473 puts vs a daily average of 65,483 options, 37,088 calls and 28,395 puts.  Traders added 844k deltas in the calls and -168k deltas in the puts.

The print that caught my eye was a buyer of 10,000+ in the money March 32 calls this morning.  After these prints hit the tape the stock never looked back.  

There was also a diagonal short calendar spread where a trader sold 2500 of the March 35 calls @ $0.64 and bought 2500 of the Feb 34 calls @ $0.60.  This trade is profitable above $34.17 tomorrow and above $34.73 on expiration day.   This is a professional trade to be long deltas, long gamma, and short vol, for a credit of $0.04.  Here is the risk/reward for tomorrow:

As you can see in the chart below WFC is testing its highs from April of 2010.  This is very interesting when you compare it to the other big banks.  JPM, GS, C, MS, AIG, BAC, USB, PNC and of course XLF are all below their 2010 highs.   

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