Thursday Options Outlook: ZION, KEY, JEF, AKS, DIA, RIO, NVDA, VCLK, BIG

July 3, 2008

Rebecca Engmann Darst co-authored this article.

Zions Bancorp (ZION) –Despite welterweight volumes trading on an
abbreviated pre-holiday session, option activity in regional bank suggested
more punishing declines in store when the market resumes trading after the
weekend. Implied volatility is higher across the board and put trading is
elevated on most sector names after Zions Bancorp shares tanked 14% on
talk of its exposure to bad home loans in Arizona and Nevada. This followed
comments from an analyst at Stifel Nicolaus as quoted on Bloomberg.
Implied volatility in Zions Bancorp is up 27% today and a read of the option
activity shows buying at the July 25 and 22.50 strikes, implying further
erosion under these new lows. Other sizable spikes in implied volatility were
observed in Corus Bankshares and Keycorp – while many these companies are
due to report earnings before expiration, explaining some of the positioning
(i.e. Zions Bancorp), the skew to puts has been fairly consistent throughout
the sector.