Capital One (COF, news, chart) puts are seeing active trading today after Barron’s Online, in an article titled From Bad To Worse for Credit Card Stocks, warned that COF and Advanta might be forced to reduce lending. According to the report, “Credit card deliquencies are on the rise, but what hasn’t been spelled out, neither by analysts nor by management at card issuers, is that rising delinquencies will likely prompt lenders to lend less, which in turn could hit profits”. In addition, some of these credit card companies are still increasing lending, even in the face of rising delinquency rates. Marian Kessler at Becker Equity Value Equity fund says, “We’re looking at the rise in delinquencies in credit cards and saying, Yikes! This is the next possible big risk.” Shares of Capital One are down $1.14 to $43.49 and 49,000 COF puts have traded, or roughly 7 times the number of call options.
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.