Options Traders Get Bullish on Citi as Bank Earnings Season Kicks Off

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Financials stocks are off to a great start heading into the first big earnings season of the year, up nearly 20% and sitting behind only energy as the S&P 500's top-performing sector in 2021.

Bank of America, Morgan Stanley and other giants in the space are reporting throughout this week, but options traders are keying in on Citi as it gears up to announce results before the bell Thursday. The stock has slightly outperformed the XLF Financials ETF over the last year, and many traders are betting that it's about to break out to even higher levels.

"This is a name that's implying a move of about 3.6% after they report earnings by the end of the week. That's slightly higher than the 3.3% or so that the company has averaged over the last eight quarters. Calls significantly outpaced puts by [a ratio of] more than 2-to-1, and the most active options were the April 72.5-calls," Michael Khouw, chief investment officer at Optimize Advisors, said Tuesday on CNBC's "Fast Money."

On average, buyers of those calls, which expire Friday, spent about $1 in premium, placing their breakeven at $73.50, or about 2% higher than where Citi closed Tuesday's session.

Citi was up 1% in Wednesday's session.


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