Capital One Plummets 6.66%: Trump's Credit Card Cap Sparks Sector-Wide Panic

Summary
• Capital One (COF) trades at $232.59, down 6.66% intraday amid regulatory turbulence
• Federal judge approves $425M depositor settlement, but Trump's 10% interest rate cap dominates sentiment
• Sector peers like Synchrony (SYF) and American Express (AXP) also under pressure

Capital One's stock has plunged to a 52-week low of $228.7 amid a perfect storm of regulatory uncertainty and sector-wide panic. The Trump administration's abrupt proposal to cap credit card interest rates at 10% has triggered a selloff across financial services, with COF's 6.66% drop reflecting deepening concerns over margin compression and credit availability. The stock's intraday range of $228.7 to $236.175 underscores the volatility, as traders grapple with the potential fallout for a company reliant on high-interest lending.

Trump's 10% Cap Threatens Credit Card Profitability
The Trump administration's surprise announcement of a 10% interest rate cap on credit cards has sent shockwaves through the financial sector. This policy, effective January 20, 2026, directly targets Capital One's core business model, which derives significant revenue from high APRs on unpaid balances. With the average U.S. credit card rate at 22.3% as of November 2025, the proposed cap would slash margins by over 50%, forcing lenders to either tighten credit standards or absorb losses. The market's immediate reaction—COF down 6.66%—reflects fears that reduced credit availability could stifle consumer spending, a key economic growth driver. Industry groups have warned this could push borrowers toward unregulated alternatives like payday lenders, exacerbating financial instability.

Credit Services Sector Reels as Trump's Cap Sparks Broad Selloff
The Credit Services sector is in freefall, with American Express (AXP) down 4.05% and Synchrony Financial (SYF) plunging 8.19%. These declines mirror COF's trajectory, as all three firms face existential threats from the proposed rate cap. Unlike banks with diversified revenue streams, Capital One's 60% reliance on credit card lending makes it particularly vulnerable. The sector's collective pain underscores the interconnectedness of financial services and the fragility of profit models built on high-interest debt. While larger banks like JPMorgan (JPM) have shown resilience, the sector's average P/E ratio of 15x suggests investors are pricing in prolonged margin compression.

Bearish Options Play Amid Volatility Surge
• 200-day average: 210.26 (well below current price)
• RSI: 57.5 (neutral but bearish bias)
• MACD: 6.69 (signal line 6.89, bearish crossover imminent)
• Bollinger Bands: Price at 235.05 (lower band), suggesting oversold conditions

Technical indicators and options data align for a bearish setup. COF is testing its 200-day support at $219.29, with RSI hovering near neutral territory. The MACD histogram's negative divergence confirms weakening momentum. For options traders, the most compelling plays are deep out-of-the-money puts with high leverage ratios. Two top picks from the options chain:

• COF20260116P220
- Put option, strike $220, expires 1/16/2026
- IV: 44.50% (moderate)
- LVR: 291.16% (high leverage)
- Delta: -0.1289 (moderate sensitivity)
- Theta: -0.0484 (modest time decay)
- Gamma: 0.0173 (responsive to price swings)
- Turnover: $209,887 (liquid)
This contract offers 750% price change potential if COF breaks below $220, with leverage amplifying gains in a 5% downside scenario. The moderate IV ensures reasonable premium costs while maintaining directional exposure.

• COF20260116P222.5
- Put option, strike $222.5, expires 1/16/2026
- IV: 43.57% (moderate)
- LVR: 202.55% (high leverage)
- Delta: -0.1755 (strong sensitivity)
- Theta: -0.0248 (low time decay)
- Gamma: 0.0217 (high responsiveness)
- Turnover: $61,732 (liquid)
This option's 400% price change potential and high gamma make it ideal for a sharp selloff. With COF near its 52-week low, the $222.5 strike offers a 5.5% buffer to current levels, balancing risk and reward.

Aggressive bears should prioritize COF20260116P220 for its liquidity and leverage, while COF20260116P222.5 suits those expecting a sharper breakdown. Both contracts benefit from the sector's regulatory-driven selloff and COF's technical weakness.

Backtest Capital One Stock Performance
The performance of COF (Citigroup Financial) after experiencing a -7% intraday plunge from 2022 to the present has shown mixed results in the backtest. While the stock managed to recover and even surpass its initial price in some cases, the overall returns were relatively modest, with a maximum return of 5.03% over a 30-day period.

Regulatory Storm Intensifies: COF Faces Pivotal 2026
Capital One's 6.66% intraday drop signals a critical inflection point for the stock, driven by Trump's 10% interest rate cap and sector-wide panic. While the $220 support level offers a potential floor, the broader regulatory environment remains a wild card. Investors should monitor AXP's -4.05% decline as a sector barometer, with COF's 200-day average at $210.26 representing a key psychological threshold. For now, the bearish case is well-supported by technical indicators and options data, but prolonged volatility could test risk tolerance. Position sizing and stop-loss placement near $225 are essential as the market digests this regulatory shockwave.