Fifth Third Bancorp (FITB) is a financial service company with over 1,300 banking centers and around $117 billion in assets. The company’s stock is currently trading around $20.20 in a 52 week range of $14.05-$20.98. The stock has been performing very well this year adding nearly 33% to share prices this year. Action in the options market this morning suggests that traders believe the run in FITB can continue through the beginning of next year. Early in today’s trading session a trader sold 15,000 of the January 20 puts for $0.42. This is a very bullish trade that represents this trader’s high level of conviction in FITB. This block also represents volume 4.7 times greater than the average daily option volume in FITB. The stock is also trading very well on a chart. Shares of FITB are trading well above the Ichimoku Cloud and the future cloud is upward sloping indicating there could be bullish action in the future. We believe that this order flow and the strong chart provide us with a signal and opportunity for a long setup in FITB. Since this trader is expressing a strong view on the stock being above $20.00 we will look to set up a strategy that profits anywhere above $20.00.
Trade: Buying 100 shares of FITB at $20.20 for every Jan 20 Call sold at $0.53
Reward: $33 per 1 lot
Breakeven: $19.67
If shares of FITB close above $20.00 on January expiration this trade will net its maximum potential profit of $33 per 1 lot. This trade is also profitable anywhere above $19.67. If the stock is above $20.00 on expiration this trade will net an annualized return of 14.7%.
