Options Spiking in E*TRADE (ETFC)

Posted in General, Options 
June 11th, 2009

It appears as though investors and traders alike are speculating on the recent reports of Citadel being in negotiations with E*TRADE Financial Corp. (NASDAQ: ETFC).  The hedge fund has already made an investment in E*TRADE and its head Ken Griffin has now taken a board seat at the company.  After all, Citadel has something to the tune of 70% of E*TRADE’s debt and has had significant leverage over aspects of E*TRADE for quite some time now.  This has call option activity much higher than normal:

  • The JULY 2009 $2.00 CALLS have traded 2,921 contracts trade and the open interest was listed as 11,560 contracts.
  • The OCTOBER 2009 $2.00 CALLS have traded 11,250 contracts and the open interest was listed as 17,632 contracts.

It is always possible that a larger deal could come about from this.  E*TRADE still has some significant exposure to toxic debt on its books despite its efforts to clean that up.  Be advised, that if problems ever really start to rise, Griffin and Citadel could end up holding much more than the marbles it already holds.

Jon C. Ogg

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