September 4, 2009 / 3:52 PM / 10 years ago

Fannie, Freddie shares jump on NYSE compliance

NEW YORK (Reuters) - Mortgage finance providers Fannie Mae and Freddie Mac said on Friday they had regained compliance with New York Stock Exchange share listing rules, reviving their respectability among investors.

Shares of Fannie Mae FNM.N gained 6.7 percent to $1.75 and Freddie Mac FRE.N rose 4.3 percent to $1.95 in mid-morning trade.

The news came 10 months after the companies were notified they had failed to satisfy the NYSE’s continued listing criterion when their common stock prices fell below $1.00 during a 30 day period.

The U.S. government was forced to bail out Fannie Mae and Freddie Mac during the depths of the credit crisis in September 2008 and their return to NYSE listing compliance was seen as a modest step in their recovery.

“Some people are assuming that because they are going to remain on the NYSE, perhaps that implies something about how the government will treat them going forward,” said Charles Lieberman, chief investment officer at Advisors Capital Management, adding that the outlook was buoying the stocks.

Options activity also picked up in the government sponsored enterprises as investors started to believe the companies’ shares would recover.

“As the stocks have performed well in the past few weeks, we have seen heavy speculative call option buying in the front month September $1 and $2 strikes,” said Joe Kinahan, chief derivatives strategist at thinkorswim, a division of TD Ameritrade Holding Corp.

“The fact that their option premiums are so cheap in real money terms makes it an easy for investors to be involved and have low risk for a nice potential return.”

Fannie Mae and Freddie Mac, along with a few other financial stocks, have dominated trading on the New York Stock Exchange in late August with many attributing the recent rally to short-squeezes.

Fannie Mae stock is off a year-low of 30 cents reached on November 21 while Freddie Mac shares traded above a 52-week low of 36 cents hit on March 9.

Freddie Mac Sept $1 and Sept $2 calls were among the most active contracts early on Friday. During the first 30 minutes of trade, the Sept $1 FRE call traded 15,834 times, exceeding its previous existing positions of 13,956 contracts. The Sept FRE $2 call had volume of 6,648 lots, according to Reuters data.

Reporting by Angela Moon NEW YORK and Doris Frankel in CHICAGO; Editing by Andrew Hay

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