Put Activity on Regional Banks: Options

CHICAGO (TheStreet) -- While there hasn't been any significant news in BB&T(BBT Quote) nor M&T Bank(MTB Quote), at least one investor has expressed moderate bearishness on the possibility of a pullback because of their exposure to commercial real estate portfolios.

During early afternoon trading, an investor bought 6,000 BBT Jan. 2010 21/26 put spreads for about $1.15 per spread. The Jan. 26 puts are up 10 cents to $1.75 so far on the day, and the Jan. 21 puts have climbed five cents to approximately 60 cents. This put spread buyer bought the Jan. 26 puts and sold the Jan. 21 puts to offset some of the cost.

The open interest of the Jan. 21 puts is 708 contracts and the Jan. 26 puts are home to current open interest of 755 contracts.

BBT shares have enjoyed a 42% rally after a recent low of $20 in July, which could be a reason why we're seeing an investor buy put spreads. Shares of MTB have rallied 46% since its June lows.

These nice runs in the stocks could be a reason why investors are looking for downside protection on concerns about regional banks and their exposure to commercial real estate portfolios, which is what differentiates them from money-center banks like Wells Fargo(WFC Quote).

BBT investors could make a maximum of $3.85 on this trade, and the maximum loss is the cost of the spread ($1.15 each).

We also saw interesting put spread buying activity in the MTB January expiration month. The Jan. 2010 45 puts and Jan. 2010 55 puts have changed hands 5,000 times each so far today.