Option trader places big bet on CIT Group recovery

CHICAGO, Aug 15 (Reuters) - An options strategist or an institution on Friday appears to be betting that the shares of commercial lender CIT Group Inc (CIT.N) will move up to a range of near $15 by January options expiration.

The bullish trade involved a substantial ratio call spread, a strategy in which an investor simultaneously buys a call option at a lower strike price and sells twice as many calls at a higher strike price.

A call allows an investor to purchase the company's shares at a given price and time.

The trade seems to imply a slow-but-sure road to recovery for CIT Group, said Rebecca Engmann Darst, equity options analyst at Interactive Brokers Group.

CIT shares on Friday rose 2.5 percent to $9.44 on the New York Stock Exchange. The last time the stock closed above $15 was on April 7.

The call spread, which was done this morning in the January contracts, accounted for much of CIT's heavy call volume traded on the day. The long-term bullish play caught the attention of traders and analysts in the options market.

Essentially, a strategist entered a ratio spread and bought about 20,000 January $10 strike calls for $2.10 a contract and sold twice as many January $15 strike calls for a net debit of 70 cents per trade, said option strategist Frederic Ruffy at web site WhatsTrading.com.

Ruffy noted the trade was a bullish one with a profit range between $10.70 and $19.30 a share.

The maximum profits of $4.30 per spread happen if CIT settles at exactly $15 a share at January options expiration. "The trade starts to turn ugly above $19.30, with substantial losses possible if the stock makes a really big move higher," Ruffy said.

Late in the day, a total of 65,000 calls traded in CIT compared to only 3,550 puts, 9 times the normal level, according to option analytics firm Trade Alert. (Reporting by Doris Frankel; Editing by Kenneth Barry)