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Another New Wachovia Low, Option Activity Predicts More of the Same

Wachovia Inc. (WB) share price woes worsen as the days go on as dividend cut fears continue to run rampant. The stock is breaking below its Jun. 13 52-week intra-day low of $17.34 to trade off by $.92, or 5.07%, to $17.21. The options market is predicting more of the same to happen with bearish deep out of the money put action prevalent yet again as it was yesterday in the $15 and $12.50 strikes. It’s noteworthy to point out that the activity is concentrated in the options expiring in the month of October. There’s about 6,271 contract volume at the $15 strike and 5,471 contracts having traded thus far today at the $12.50 strike, and with a premium of about $2 there would have to be significant downside for those options just to break even. The options volume is on top of Friday’s explosion in the $17.50 and $15 June puts where volume was in excess of 20,000 contracts. Open interest had previously been only a couple thousand and a few hundred contracts respectively.

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