Bullish Move on State Street

CHICAGO (TheStreet) -- An investor expressed moderate bullishness on State Street (STT) Thursday by purchasing a call spread.

The investor bought the December 46-50 call spread 10,000 times for around 70 cents per spread. Drilling down to the specifics, the investor bought the December 46 calls for 98 cents and simultaneously sold December 50 calls for 28 cents.

This cost of 70 cents means that the investor needs STT shares to expire higher than $46.70 at December expiration, unless of course the call spread appreciates with the shares prior to expiration and the investor decides to sell the spread back out to book profits. Since this spread traded at 10:30 a.m. EST, the spread has already appreciated to over 75 cents.

Shares of STT currently are trading up $1.5 to $42.14. Implied volatility of the December 46 calls is currently 46, and at 43 for the December 50 calls. This compares to a 63-day realized volatility of 42.5.

In January of this year, STT shares dropped to $14.89. Since that time, the stock has traded as high as $55 before starting a slide that has now lasted more than two weeks.

Earnings were announced on Oct. 20, which didn't help matters as the company reported a penny better than expected, but warned that things were not looking as good for the coming quarters, as fee revenue was lower than anticipated. However, this negative trend in the stock could be the bull case for this call spread -- the thought that the stock has reached an oversold condition, and could be due for a relief rally.

-- Written by Jud Pyle in Chicago

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