By Saqib Iqbal Ahmed

NEW YORK (Reuters) – New York Community Bancorp options drew increasingly bearish trading on Wednesday, as the bank’s shares extended their recent sell-off.

Put contracts that would guard against a plunge in the shares below $2 by mid-March were among the most actively traded, with about 8,000 of them changing hands as the stock fell about 13% to $3.65 on Wednesday morning. March puts at the $3 strike saw the heaviest volume, trading some 12,600 shares.

Rating agency Moody’s downgraded New York Community Bancorp’s long-term and some short-term issuer ratings to junk on Tuesday.

The bank’s shares have dropped more than 60% since January 30, after the lender disclosed huge provisions tied to likely sour loans from the commercial real estate segment, posted a quarterly loss and slashed its dividend payout.

“As we learned last year, banks that are facing a crisis can unravel quickly, so it’s not surprising that people would try to either hedge against it or speculate on it,” said Steve Sosnick, chief strategist at Interactive Brokers.

Overall, 131,000 New York Community Bancorp contracts traded in the first hour, about nine times the usual volume, according to Trade Alert data. Puts, typically bought to express a bearish or defensive view, outnumbered calls, generally a bullish play, 2.3-to-1.

Traders also picked up protection against a drop in the shares of the SPDR S&P Regional Banking ETF. The ETF’s shares have slipped about 13%, since January 30.

Still, bearish sentiment in the ETF’s options was not as extreme as in New York Community Bancorp’s contracts.

“While it’s clear that banks are continuing to underperform, and that we still see put buying in KRE and the like, it hasn’t yet developed into the type of situation we saw last March,” Sosnick said.

Meanwhile, short sellers targeting shares of a group of U.S. regional banks, including New York Community Bancorp were up about $1.37 billion in paper profits since January 30, according to data and analytics company Ortex. New York Community Bancorp alone accounted for about $174 million of those gains.

(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Nick Zieminski)

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