Citigroup (NYSE:C) provides a range of financial products and services to consumers, corporations, governments and institutions.
The company operates through two segments, Citicorp and Citi Holdings. The Citicorp segment operates as a global bank for businesses and consumers through two primary businesses, Regional Consumer Banking and Institutional Clients Group. The Citi Holdings segment operates Brokerage and Asset Management, Local Consumer Lending, and Special Asset Pool businesses. Citigroup has approximately 200 million customer accounts and operates in approximately 160 countries.
After a spectacular start to the year, banking stocks are facing a few headwinds right now, due mainly to a weak report from best-in-breed JPMorgan (NYSE:JPM), more rumblings out of Europe of potential downgrades, and the enduring problem that is Greece.
With bank stocks generally up over 20% just this year, sentiment readings are getting rather frothy. As one of the biggest money-center banks, Citigroup has had a similar great start to the year, moving up over 20% from $26.31 to over 31 just this year.
While some of the move is attributable to short-covering and the unwinding of last year’s performance drag, the momentum may have carried the stock too far, too fast.
Given the extreme overbought levels along with low levels of implied volatility (which can be, at times, a harbinger of a top), I am looking to take a counter-trend position — watching for C to retrace about 60% of its gains by March expiration, which would put the stock around the $28.50 level.
Based on Citigroup’s current market price of $30.74 and using a target price of $28.50, a target date of March 16, 2012, and $1,000 of investment capital, this is an excellent candidate for capturing some nice gains by buying the C March 40 Put or selling the C March 28-25 put credit spread.
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