This week, the news has been rife with reports of US regional banks experiencing financial difficulties, with two high-profile failures grabbing headlines. Like many, we've been closely following these developments and trying to make sense of what's going on. In this blog post, we're going to take a data-driven approach and dig deeper into the trade activity around regional banks using Polygon's real-time and historical stock and options market data.
We've chosen to focus on a handful of stocks in the iShares U.S. Regional Banks ETF and will analyze percent change, daily cash traded in stocks, and options trade activity to gain insights into overall activity levels. Stock prices are important, but trade activity can provide additional signals about overall interest in a stock. By examining factors like cash flow, and options activity, we can gain a deeper understanding of market sentiment.
Getting a Baseline
To better understand the changes in trade activity around regional banks, we first established a baseline by taking a 90-day average of cash flow and options trades for each stock. We then compared this baseline to the trade activity in the past 9 days, around the time when news of the bank failures started to emerge. Trade activity can be a strong signal of interest in a stock.
This approach helps us build a reference point to better identify any significant deviations from normal trade activity. The resulting data is shown in the table below.
| Name | YTD % Change | Cash Traded | Options Trades |
|---|---|---|---|
| PNC Financial Services Group (PNC) | -20% | 2X | 3X |
| First Republic Bank (FRC) | -75% | 9X | 237X |
| SVB Financial Group (SIVB) | -100% | 5X | 17X |
| Signature Bank (SBNY) | -100% | 3X | 15X |
| U.S. Bancorp (USB) | -25% | 2X | 5X |
| Truist Financial Corporation (TFC) | -32% | 3X | 10X |
| M&T Bank Corp. (MTB) | -16% | 2X | 4X |
| Fifth Third Bancorp (FITB) | -26% | 3X | 10X |
| Huntington Bancshares Inc (HBAN) | -25% | 2X | 7X |
| Regions Financial Corp. (RF) | -19% | 2X | 5X |
| Citizens Financial Group, Inc. (CFG) | -22% | 2X | 4X |
| KeyCorp (KEY) | -34% | 3X | 12X |
| First Horizon Corporation (FHN) | -36% | 2X | 11X |
| Comerica Incorporated (CMA) | -33% | 3X | 12X |
| Zions Bancorporation N.A. (ZION) | -38% | 4X | 26X |
The table above provides a quick snapshot of cash traded and options trade activity up to 2023-03-16 for a select few stocks in the iShares U.S. Regional Banks ETF, distilling the data down into something easily digestible. But we wanted to dig a little deeper and show you what this data actually looks like.
Here's the Plots
To better understand how trade activity has changed in the wake of recent regional bank failures, we looked at cash flow traded in each of these stock. Specifically, we took a 90-day average of all cash traded in the stock and compared it to the cash traded in the past 9 days, around the time when things started happening. As you can see from the plot above, there has been a significant increase in cash flow traded in the past 9 days.
In addition to analyzing cash flow traded in the stock market, we also looked at options trade activity to gain further insights into market sentiment. Similar to our analysis of cash flow, we took a 90-day average of all options traded and compared it to the options traded in the past 9 days, around the time when things started happening. As you can see from the plot above, there has been a significant increase in options activity in the past 9 days for several of the stocks we analyzed. This suggests that investors are increasingly turning to options to take advantage of potential price movements.
What is interesting, is that First Republic Bank (FRC) has seen an eye-watering 237X fold increase in options activity, highlighting the extent to which investors are turning to derivatives to capitalize on potential market movements. Meanwhile, the failures of SVB Financial Group (SIVB) and Signature Bank (SBNY) are also evident in the plot, with both stocks experiencing significant increases in options activity then stopping.
Conclusion
We hope that this analysis has shed some light on the recent developments surrounding US regional banks and the corresponding trade activity. By taking a data-driven approach and analyzing both stock and options trade activity, we were able to gain valuable insights into market sentiment and the factors driving recent changes in regional bank performance.
If you're interested in exploring this data further, we encourage you to check out our Stocks & Options APIs, which provide access to real-time and historical stock and options market data. Ultimately, we wanted to satisfy our own curiosity about what was going on in the market and thought we'd share our results with others who may be interested in this topic.
