©Reuters. A trader works at the place where New York Community Bancorp shares are traded on the New York Stock Exchange (NYSE) in New York City, U.S., February 7, 2024. REUTERS/Brendan McDermid
By Saqib Iqbal Ahmed
NEW YORK (Reuters) – Community Bancorp of New York Options (NYSE:) saw increasingly bearish trading on Wednesday as the bank’s stock extended its recent sell-off.
Put contracts that would protect against a stock crash below $2 by mid-March were among the most actively traded, with about 8,000 of them changing hands as the stock fell about 13% to $3.65 on Wednesday morning . March puts at the $3 strike saw the highest volume, trading about 12,600 shares.
Ratings agency Moody’s (NYSE:) on Tuesday downgraded New York Community Bancorp’s (NASDAQ:) long-term and some short-term issuer ratings to junk.
The bank’s shares have fallen more than 60% since Jan. 30, after the lender disclosed large provisions related to likely bad lending from its commercial real estate segment, posted a quarterly loss and cut its dividend payout.
“As we learned last year, banks facing a crisis can crumble quickly, so it’s no surprise that people try to hedge or speculate on it,” said Steve Sosnick, chief strategist at Interactive Brokers (NASDAQ: ).
Overall, 131,000 New York Community Bancorp contracts were traded in the first hour, about nine times the usual volume, according to Trade Alert data. Puts, generally purchased to express a bearish or defensive view, outnumbered calls, generally a bullish move, 2.3 to 1.
Traders also gained protection against a decline in shares of the SPDR S&P Regional Banking ETF (NYSE:). Shares of the ETF have fallen about 13% since Jan. 30.
However, the bearish sentiment in ETF options has not been as extreme as in New York Community Bancorp contracts.
“While it is clear that banks continue to underperform and that we still see put buying in KRE and the like, the situation has not yet developed into the type of situation we saw last March,” Sosnick said.
Meanwhile, short sellers who targeted shares of a group of regional U.S. banks, including New York Community Bancorp, earned about $1.37 billion in profits, according to data and analytics firm Ortex paperbacks from January 30th. New York Community Bancorp alone accounted for about $174 million of those gains.