Bears Eyeing HSBC Holdings

HSBC Holdings (HBC, $46.70, down $0.98) could be on the verge of a major breakdown as the put option pits have been busier than a craps table on payday. The company is a British bank and speculation has been building that it may be the next house of cards that could fall.

HSBC has been dropping on revenue concerns and the put option activity was heavy on Monday. What is interesting was the amount of volume in some of the January put options which are set to expire this week. There were nearly 1800 contracts of the January 45 puts (HBCMI, $0.75, up $0.30) that switched hands yesterday.

The February 45 puts (HBCNI, $2.74, up $0.64) saw over 2600 contracts trade while the March 45 puts (HBCOI, $4.60, up $0.80) traded over…87,000 contracts! Holy sheet!

Folks, that is an amazing number of contracts traded for an option. The March 40 puts (HBCOH, $2.55, up $0.40) traded nearly 14,000 contracts and the March 35 puts (HBCOG, $1.50, up $0.25) traded 12 six.

That is over 100,000 contracts on 3 strike prices. So I did some research…

In December, HSBC was trading at $54 at the start of option expiration week and by Friday, the day the December options expired, bears had taken the stock down to $45. There was an enormous amount of put options buying that same week.

It appears option traders are betting big on HSBC breaking through its 52-week low of $44.59. Once again, the January put options would be the riskiest but I do like all of the February and March put options I have listed.

Rick Rouse
Rick@OptionsMentoring.com

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