Regulators Take Aim at Wells Fargo Technology Oversight

Regulators Take Aim at Wells Fargo Technology Oversight

Wednesdays Vital Data: General Motors, IBM and Wells Fargo

Wells Fargo & Co.s wide-ranging regulatory woes have extended to another part of its business: its technology operations.

The Office of the Comptroller of the Currency in recent weeks sent Wells Fargo a regulatory warning that often precedes an enforcement action, according to people familiar with the matter.

Welkers wealth-management division sits within Wells Fargos wealth and investment management unit, which has been troubled for months. Whistleblowers have alleged that financial advisers there pushed clients into products or investing platforms intended to generate more revenue for the bank and bigger bonuses for employees rather than the best returns for customers, and the Justice Department, the Journal notes. The Securities and Exchange Commission and the Labor Department are investigating.

In early morning trading, futures on the Dow Jones Industrial Average are up 0.63% and S&P 500 futures are higher by 0.73%. Nasdaq-100 futures have added 0.98%.

A Wells Fargo spokeswoman declined to comment to the Journal beyond the banks memo. Welker didnt immediately respond to a request for comment. The bank had said previously that it is committed to promoting diversity and inclusion in all aspects of our business.

In the options pits, the quiet trading day drove overall volume levels back toward average levels. Specifically, about 15.1 million calls and 14.4 million puts changed hands on the session.

Welker was a focal point of a gender bias investigation in Wells Fargos wealth and investment management unit, the publication writes. Some female executives have complained that Welker used demeaning and sexist language.

Over at the CBOE, the single-session equity put/call volume ratio rebounded slightly to 0.67. Meanwhile, the 10-day moving average held its ground at 0.67.

Options activity was light on Monday with little news events driving our list of most-actives. General Motors (NYSE:GM) saw continued options interest following its recent earnings win. IBM (NYSE:IBM) benefited from news of its CEO purchasing $3 million in stock. Finally, Wells Fargo (NYSE:WFC) saw an increase in put trading.

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General Motors recent earnings release pole-vaulted the stock out of a downtrend and continues to keep the stock aloft. Market moving news was absent yesterday, but active options trading still put GM on the map.

The post-earnings price action is building a clean high base pattern that should resolve itself higher.

On the options trading front, calls outpaced puts on the day. Activity swelled to 169% of the average daily volume, with 96,113 total contracts traded. Calls accounted for 61% of the day’s take.

The post-earnings volatility crush has been in full force over the past week driving volatility back down to 31% or the 44th percentile of its one-year range. Traders are now pricing in daily moves of 2% for GM.

IBM’s recent record-breaking $34 acquisition of Red Hat (NASDAQ:RHT) initially delivered a 4% loss to the stock. But with this week’s rebound the tech juggernaut is now trading higher than when the news was first announced.

Following the acquisition announcement, IBM CEO Ginni Rometty snatched up $3 million worth of the company’s stock.

Shares of IBM remain firmly entrenched in a downtrend so it remains to be seen if this week’s rally can go the distance. For now, my dead-cat bounce meter is going off.

On the options trading front, traders came after calls with a vengeance. Activity lifted to 167% of the average daily volume, with 97,863 total contracts traded. Calls garnered 77% of the total.

Implied volatility remains lofty for IBM options. It’s actually higher than where it sat heading into the earnings release, and that’s saying something about the level of uncertainty baked into expectations right now. At 28%, the implied volatility rests at the 73rd percentile of its one-year range. Traders are now pricing in daily moves of 1.8%.

Nonetheless, a light trading day in stocks elsewhere allowed WFC to jump to the top of the options active list for the day.

After a volatile October, WFC shares remain in hot mess mode. With the stock below a falling 50-day and 200-day moving average, sellers maintain the upper hand here.

On the options trading front, put options won the popularity contest. Activity ramped to 152% of the average daily volume, with 102,417 total contracts traded. 62% of the trading fell on the put side of the ledger.

Implied volatility has been retreating but remains historically high at 26%. It now rests at the 53rd percentile of its one-year range and traders are pricing in daily moves of 1.7%

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.

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