[caption id="attachment_846" align="aligncenter" width="500" caption="Citigroup"][/caption]
Citigroup is all over the news today. NYT:Citigroup Tries to Stop the Drop in Its Share Price and FT:Citi board locked in talks as shares dive.
After failing to retake \$10 earlier in the week, C share price has gone vertical. Since Citigroup is in-play in the market this week, this is a great time to buy an options strangle to capitalize on this volatility. The bet here is that Citigroup would go down in flames or it would rise back from the dead. This position will breakeven if C goes below \$0.88 or above \$6.62. Given that C was at \$10 just days ago, moving from \$3.44 as of now to beyond either of those range seems viable.
Upside: Lots of talk about C at the moment. The stock is in-play. High volatility is what the options strangle feed off by.
Resistance: \$5, we could bounce around the \$5 range
Downside: High volatility so options premium is expensive. The volatility might be factored in the price already, so this \$0.88 to \$6.62 range could be a trading range for C until expiry next month.
Support: errr... \$0?
Bottom line: This is a hedged play. I can profit if C goes up or down. Given the extent of the situation with Citigroup, I think it's highly likely we would break this range.