Arbor Realty Trust (ABR) Plunges 13.5% on Earnings Disappointment: A Bearish Reversal Amid Sector Volatility?

Summary
• Arbor Realty Trust (ABR) trades at $9.995, down 13.46% from its previous close of $11.55
• Intraday range spans $9.61 to $11.17, reflecting extreme volatility
• Q3 earnings report shows $0.20/share net income, down from $0.31 in Q3 2024
• Sector peers like Annaly Capital (NLY) rally 1.01% as Fed rate cuts boost mREITs

Arbor Realty Trust’s stock has imploded in intraday trading, shedding over 13% despite beating Q3 earnings estimates. The sharp selloff contrasts with a broader mortgage REIT sector rally, raising questions about divergent market sentiment. With loan loss provisions, CECL adjustments, and a $360M liquidity boost in the spotlight, investors are scrambling to parse the earnings report’s implications for ABR’s near-term trajectory.

Earnings Beat Fails to Offset Loan Loss Concerns
Arbor’s Q3 earnings report revealed a $38.5M net income ($0.20/share), exceeding estimates but lagging behind the $0.31/share in Q3 2024. The decline in net income, coupled with a $17.5M CECL loan loss provision and $7.8M net loss-sharing provision, signaled deteriorating credit quality in its $11.71B loan portfolio. The market’s bearish reaction reflects skepticism about the company’s ability to sustain earnings amid rising delinquencies (25 non-performing loans, $566M UPB) and a 6.95% weighted average yield, down from 7.95% in Q2. The $48M gain on equity investments and $360M liquidity boost failed to offset these red flags, triggering a liquidity-driven selloff.

Mortgage REITs Rally on Fed Cuts, But ABR Diverges Sharply
Mortgage REITs (mREITs) gained 0.18% in October as Fed rate cuts eased financing costs, with Annaly Capital (NLY) surging 1.01%. The sector’s 11.83% average yield and improved credit outlook contrasted with ABR’s 13.5% plunge. While mREITs benefited from lower repo rates and stabilized book values, ABR’s loan portfolio struggles—25 non-performing loans and a 6.64% weighted average interest rate—highlighted structural risks. The divergence underscores ABR’s vulnerability to credit stress amid a sector-wide recovery.

Bearish Setup: Leveraged Puts and Short-Term Gamma Plays
• 200-day MA: 11.636 (below) • RSI: 54.3 (neutral) • MACD: -0.062 (bearish) • Bollinger Bands: 9.61–12.34 (oversold lower band) • Kline Pattern: Short-term bearish trend

ABR’s technicals point to a short-term bearish reversal, with RSI at 54.3 and MACD below zero. The 52W range (8.43–15.76) suggests a potential rebound to 11.81 (200-day MA) but a breakdown below 9.61 could trigger further declines. The 11.81–11.29 Bollinger Band range and 5.13% turnover rate indicate moderate volatility. No leveraged ETF data is available, but the options chain offers high-leverage bearish plays.

Top Option 1: ABR20251107P10 (Put, $10 strike, Nov 7 expiry)
• IV: 33.60% (moderate) • Leverage: 43.28% • Delta: -0.538 (moderate sensitivity) • Theta: -0.0625 (high time decay) • Gamma: 0.7996 (high sensitivity to price swings) • Turnover: 6,867
• This put offers 316.67% price change potential with high gamma and moderate IV, ideal for a 5% downside scenario (ST = $9.495). Payoff: max(0, $9.495 - $10) = $0.505 per share, or $50.50 per contract.

Top Option 2: ABR20251121P10 (Put, $10 strike, Nov 21 expiry)
• IV: 49.72% (high) • Leverage: 18.78% • Delta: -0.502 (moderate sensitivity) • Theta: -0.0274 (moderate time decay) • Gamma: 0.3259 (moderate sensitivity) • Turnover: 11,761
• This put balances high IV with moderate gamma, offering 323.08% price change potential. Payoff under 5% downside: max(0, $9.495 - $10) = $0.505 per share, or $50.50 per contract.

Aggressive bears may consider ABR20251107P10 for a Nov 7 short-term play, while ABR20251121P10 suits a mid-term bearish outlook. Both contracts offer high leverage and gamma to capitalize on ABR’s volatility.

Backtest Arbor Realty Trust Stock Performance
I attempted to run the event-level back-test, but the server returned an internal error(convert_statistics function not found). This looks like a bug inside the event_backtest engine rather than a data orparameter issue on our side.Two possible ways forward:1. Wait for the service team to fix the defect and rerun the dedicated event_backtest engine (preferred if you need the full post-event trend dashboard it produces).2. Use a workaround: run a simple “open on plunge day, exit after N days / or at take-profit / stop-loss” strategy through the stable strategy_backtest engine. This would still give us entry-level statistics (CAGR, max-dd, etc.) but won’t include some of the specialized event metrics (optimal holding period, post-event cumulative curve decomposition).Let me know which option you’d prefer, or if you’d like me to attempt anyother workaround in the meantime.

Short-Term Bear Case: Watch 9.61 Support and Sector Sentiment
ABR’s 13.5% selloff reflects deepening concerns over loan losses and CECL provisions, despite a liquidity boost. The technical setup—oversold RSI, bearish MACD, and a breakdown below the 200-day MA—supports a short-term bearish bias. However, the 9.61 intraday low and 11.81–11.29 Bollinger Band range suggest potential for a rebound. Investors should monitor the 9.61 support level and the sector’s reaction to Fed policy. Annaly Capital (NLY)’s 1.01% rally highlights mREITs’ resilience, but ABR’s credit risks may isolate it. Action: Short ABR20251107P10 if 9.61 breaks, or pivot to NLY for sector exposure.