Citigroup (C) Reverses Course

12:20pm (EST)

The market has gotten off to a slow start as both the bulls and bears feel each other out before mapping their next move. Futures were pointing towards a higher open but were weakening as we headed towards the opening bell. There is some rhetoric out of Europe concerning Greece as S&P downgraded their debt (again) amid concerns the country will need more bailout funds which has kept traders in check.

The Dow had traded in a tight range, hitting a high of 12,669 at the open while the low has been 12,620. However, things are picking up as we head to press as the index is currently up 61 points to 12,700. The S&P is up 7 points to 1,346. The Nasdaq is showing a gain of 18 points to 2,845.

Citigroup (C, $44.02, down $1.18) completed it 1-for-10 reverse stock split this morning which is why you shares in the $40’s and not at $4+. We aren’t big fans of reverse splits which are usually done by companies that are about to lose their listing on an exchange or to get investors’ confidence up. When a company does a reverse stock split they are trying to maintain compliance but Citigroup is a little different because they really didn’t have to do the split.

Citigroup’s new share price will make it easier to short and for mutual fund managers to buy. Most funds restrict managers from buying stocks under $5 so this won’t be a problem at today’s prices. Speaking of reverse stock splits…

American International Group (AIG, $29.57, down $1.13) is at new 52-week lows today. Imagine that. We covered the company’s reverse stock split a few years ago which helped them keep their listing on the NYSE. AIG’s shareholders approved a one-for-20 reverse stock split in 2009 and we did well shorting this name all the way down to $1 before the split. In fact, some of our BEST option trades have been shorting AIG if you look at our Track Record over the years.

We have a lot to cover inside our Members Area including a trade adjustment. On two of the three trades we able to get filled at our recommended prices but we are going to have to raise our entry price for our other recommendation. Subscribers, check for the updates.

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Citigroup (C) Reverses Course

CFTC Disclosure: