Capital One Plummets 6.6% Amid Trump's Credit Card Fee Cap Shockwave

Summary
• Capital One (COF) tumbles 6.59% to $232.77, erasing $15.43 from its value in under 6 hours
• Trump's 10% credit card interest rate cap proposal triggers sector-wide selloff
• Options market sees explosive activity in 220-strike puts and 240-strike calls

Capital One's stock imploded in volatile afternoon trading as President Trump's surprise 10% credit card interest rate cap proposal sent shockwaves through the financial sector. The 6.6% drop - the largest single-day decline since 2020 - has triggered a chain reaction across credit services stocks, with American Express and Synchrony Financial also reeling. With the stock trading near its intraday low of $228.70, traders are scrambling to reassess risk exposure in a sector suddenly facing existential regulatory threats.

Trump's 10% Credit Card Cap Sparks Sector-Wide Panic
President Trump's Truth Social announcement of a 10% interest rate cap on credit cards triggered immediate market panic. The proposal, set to take effect January 20, 2026, threatens to slash profit margins for credit card issuers by up to 50% according to Wells Fargo estimates. Capital One's business model - with 45% revenue from credit card operations - faces existential risk as the company's 22.3% average APR would be cut in half. The market's reaction was exacerbated by Trump's aggressive rhetoric suggesting non-compliant institutions would be 'in violation of the law,' creating regulatory uncertainty. This triggered a flight to safety in options markets, with 220-strike puts seeing 780% price surges and 240-strike calls experiencing 85% declines.

Credit Services Sector Reels as Trump's Policy Threatens Profit Margins
The credit services sector is collapsing under Trump's proposal, with American Express (AXP) down 4.14% and Synchrony Financial (SYF) falling 8.68%. Visa and Mastercard are also down 1.5-1.66% despite being payment processors rather than direct lenders. The sector's average P/E ratio has contracted from 25x to 18x in pre-market trading. Bank industry groups warn this could reduce credit availability by 30-40%, particularly impacting subprime borrowers who represent 25% of Capital One's credit card portfolio. The regulatory overhang now threatens to reshape the entire credit ecosystem, with buy-now-pay-later providers like Affirm seeing mixed market reactions.

Options Volatility Explodes as Traders Hedge Trump's Regulatory Gamble
• 200-day MA: 210.26 (well below current price) • 30-day MA: 239.70 (resistance) • RSI: 57.5 (neutral) • MACD: 6.69 (bearish crossover) • Bollinger Bands: 235.05 (lower band) • Gamma: 0.0311 (high sensitivity) • Theta: -0.764 (rapid time decay)

With COF trading near its 200-day MA and RSI in neutral territory, the technical picture suggests further downside potential. The options market is pricing in 40-45% implied volatility, with 220-strike puts and 240-strike calls emerging as key battlegrounds. Two standout options for aggressive positioning:

• COF20260116P220
- Put Option, Strike: $220, Expiry: 1/16/2026
- IV: 45.73% (moderate), Leverage: 274.23% (high), Delta: -0.132 (moderate), Theta: -0.0546 (slow decay), Gamma: 0.0172 (responsive), Turnover: 158,963 (liquid)
- This put option offers explosive leverage with 45% implied volatility and 274% leverage ratio. The moderate delta ensures it maintains value through price swings while the 1/16 expiry aligns with potential regulatory clarity. Projected payoff in 5% downside scenario: $10.00

• COF20260116C240
- Call Option, Strike: $240, Expiry: 1/16/2026
- IV: 39.17% (reasonable), Leverage: 133.20% (high), Delta: 0.273 (moderate), Theta: -0.764 (rapid decay), Gamma: 0.0311 (high sensitivity), Turnover: 997,078 (extremely liquid)
- This call offers asymmetric upside potential with 133% leverage and high gamma sensitivity. While theta decay is aggressive, the 39% IV provides downside protection. Projected payoff in 5% downside scenario: $0.00 (at-the-money)

Aggressive bulls should consider COF20260116C240 into a bounce above $240, while bears should prioritize COF20260116P220 as a hedge against regulatory overreach. With 220-strike puts seeing 780% price surges, the options market is clearly pricing in a 20-30% downside scenario.

Backtest Capital One Stock Performance
The performance of COF (Citigroup Financial) after experiencing a -7% intraday plunge from 2022 to the present has shown positive short-to-medium-term gains. The backtest data indicates that 52.33% of days resulted in a positive return within three days, rising to 54.87% over ten days, and 57.84% over thirty days. The maximum return observed was 5.03% over thirty days, suggesting that COF has a higher probability of positive returns in the immediate aftermath of a significant downturn.

Regulatory Overhang Demands Immediate Position Reassessment
The market's violent reaction to Trump's credit card cap proposal underscores the sector's vulnerability to regulatory overreach. With COF trading near its 200-day MA and RSI in neutral territory, technical indicators suggest further downside potential. American Express (-4.14%) remains the sector's bellwether, with its price action likely to dictate broader market sentiment. Investors should monitor the 220-strike put volume and 240-strike call open interest as key liquidity indicators. Given the regulatory uncertainty, position sizing should be conservative with stop-losses below $220. The next 72 hours will be critical as market participants await clarification on Trump's enforcement mechanism.