First Republic Bank Options Traders Anticipating A Big Drop For Stock By Friday

Shares of regional banks rebounded sharply, with First Republic Bank FRC, Western Alliance Bancorporation WAL and PacWest Bancorp PACW closing higher on Tuesday.

On CNBC’s "Options Action," Mike Khouw of Optimize Advisors said First Republic Bank traded at 24x average daily options volume and was the 13th busiest single stock option on Tuesday.

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There were buyers of 20,050 of the March 30-puts at an average price of $2.06 per contract, Khouw mentioned.

The trader expects First Republic’s stock down at least 30% by Friday.

On Monday, Raymond James analyst David Long released a note on First Republic Bank, downgrading his rating from a Strong Buy to Market Perform, but did not change his price target of $150 a share.

Long outlined risks the bank could face if withdrawal requests exceed deposits, it could shrink the company’s EPS in an “uncertain environment.”

"We are not making any adjustments to our EPS forecast given the uncertain backdrop," the note said. “However, we recognize that near-term profitability carries less importance, and that our current estimates are at risk for a negative revision.”

Price Action: Shares of First Republic Bank gained 27% to close at $39.63 on Tuesday, and added 8.5% in after-hours trading.

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Posted In: NewsShort IdeasOptionsSmall CapMarketsMediaTrading IdeasCNBCMike KhouwOptimize AdvisorsOptions Action
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