Options Traders Stay Focused on Regional Banks

In our late-session report yesterday, we noted bulky, bearish volumes and buoyant volatility in the options of a pair of regional banks centered in the southern portion of the country, Colonial Bancgroup (CNB - commentary - Cramer's Take) and Synovus (SNV - commentary - Cramer's Take).

Today's final hour of trading -- a time of day that has quickly assumed infamy as a kind of "witching hour" or downside -- brought further selling pressure and redoubled focus on the regional banking segment. Today's conspicuous movers are SunTrust Banks (STI - commentary - Cramer's Take) and Zions Bancorp (ZION - commentary - Cramer's Take), both trading on significant downside along with the rest of the market.

First, a look at SunTrust, where a 7.3% decline for the share price to $37.00 is coinciding with options volume that's five times the normal level. The most conspicuous trade today appears to be a 15,000-lot short put spread involving deep-in-the-money strikes in the January contract. In an opening position, the trader sold 60-strike puts and bought 50-strike puts for a net credit of $7.70 that this trader hopes to keep if both positions expire worthless by January's expiration. November puts at the 35 and 40 strikes are also active today, most of this volume appearing to sell to the bid as traders seek to take advantage of premiums some 50%-60% higher than yesterday's levels.

Trading on shallower downside, shares in Zions Bancorp are down 4% at $37.76 as options trade at three times the normal level, where it looks like a trader may have taken profits in an existing 5,000-lot position in November 50 puts, and rolled the position to a lower strike in the December 40 puts, where a fresh 5,000-lot position was opened for $7.60 apiece. We note here that while this strike is presently in-the-money, the hefty premium requires more than $5 more to the downside (another 16% off current levels) just to break even.

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At the time of publication, Darst had no positions in the stocks mentioned.

Rebecca Engmann Darst is the Portfolio Manager for TheStreet.com?s Options Alerts Portfolio newsletter and an equity options analyst for RealMoney Each Thursday at 6:30 a.m. EST, she delivers the early-morning lowdown on option volume and sector trends on CNBC's "Squawk Box." Prior to her work in the equity options market, she spent seven years in Scandinavia as a Copenhagen-based chief reporter for a European Commission news service, correspondent for Spanish daily El Mundo and Radio Netherlands, followed by stints at Nordea Bank and Saxo Bank.