Charles Schwab Plummets 3%: What's Behind the Sudden Selloff?

Summary
• Charles Schwab (SCHW) plunges 3.01% to $95.715, its lowest since March 2024
• Institutional investors boost stakes, but insider selling accelerates
• $20B buyback plan and $99.35 analyst price target fail to arrest decline

The Charles Schwab Corporation’s stock has plunged to a 15-month low amid a confluence of bearish catalysts. Despite a $20 billion share repurchase plan and a $99.35 consensus price target, the stock has cratered 3.01% intraday, trading below its 50-day moving average. With institutional ownership rising to 84.38% and insider sales totaling $29.3M in 90 days, the selloff reflects a tug-of-war between bullish fundamentals and deteriorating short-term sentiment.

Buyback Plan and Analyst Upgrades Fail to Stem Selloff
The $20 billion buyback authorization, which allows Schwab to repurchase 11.6% of its shares, has failed to arrest the selloff as investors remain skeptical about the stock’s valuation. While 16 analysts maintain a 'Buy' rating and Morgan Stanley raised its target to $131, the market is pricing in risks from Schwab’s -62.85% interest coverage ratio and elevated debt. The stock’s 52-week high of $99.59 now acts as a psychological ceiling, with RSI at 64.30 signaling overbought conditions. Meanwhile, insider selling by executives like Paul Woolway and Jonathan Beatty has eroded confidence, compounding pressure on the stock.

Diversified Financials Mixed as Franklin Resources Outperforms
The Diversified Financial Services sector remains fragmented, with Franklin Resources (BEN) surging 1.25% despite Schwab’s decline. While Schwab’s debt-heavy balance sheet and volatile earnings growth (148% YoY) raise concerns, sector peers like Enterprise Financial Services (EFSC) report robust Q2 results. However, Schwab’s 26.26 P/E ratio lags behind EFSC’s 39.3% margin expansion, highlighting divergent performance. The sector’s 0.96 beta suggests moderate correlation with broader markets, but Schwab’s unique exposure to brokerage margins and regulatory shifts isolates its underperformance.

Options Playbook: Capitalizing on Volatility and Buyback Catalysts
• 200-day MA: $82.27 (well below current price)
• RSI: 64.30 (overbought)
• MACD: 1.51 (bullish divergence)
• Bollinger Bands: $92.82–$99.96 (current price near lower band)

With Schwab trading near its 52-week low and a $20B buyback program in play, the stock presents a high-risk, high-reward setup. Key levels to watch include the $95.31 intraday low and the $96.39 20-day MA. While the 6.69/10 internal diagnostic score suggests potential for a rebound, the -3.01% intraday drop underscores near-term fragility.

Top Options Picks:
• SCHW20250822C99
- Type: Call
- Strike: $99
- Expiry: 2025-08-22
- IV: 24.11% (moderate)
- Leverage: 217.45% (high)
- Delta: 0.208 (moderate sensitivity)
- Theta: -0.1169 (rapid time decay)
- Gamma: 0.0751 (responsive to price swings)
- Turnover: 20,657 (liquid)
- Why: This call option offers explosive leverage if Schwab breaks above $99, aligning with the 52-week high and analyst price targets. The high gamma ensures sensitivity to price swings, while the moderate IV suggests reasonable cost.

• SCHW20250822C100
- Type: Call
- Strike: $100
- Expiry: 2025-08-22
- IV: 23.94% (moderate)
- Leverage: 354.37% (extreme)
- Delta: 0.1418 (low sensitivity)
- Theta: -0.0850 (moderate decay)
- Gamma: 0.0592 (modest responsiveness)
- Turnover: 11,199 (liquid)
- Why: This deep-out-of-the-money call provides maximum leverage for a breakout above $100, Schwab’s psychological resistance level. The 354% leverage ratio amplifies gains if the stock surges post-earnings or on buyback-driven optimism.

Payoff Scenario: A 5% downside to $90.93 would yield $0 for both calls, but a 5% upside to $100.50 would net $0.50 for SCHW20250822C99 and $0.50 for SCHW20250822C100. Aggressive bulls should target a $99.50 close to trigger a short-term reversal.

Backtest The Charles Schwab Stock Performance
The Schwab U.S. Broad Market ETF (SCHW) has historically shown resilience following a -3% intraday plunge. The backtest data reveals that such events have occurred 590 times over the past five years, with a 3-day win rate of 57.29%, a 10-day win rate of 61.36%, and a 30-day win rate of 66.95%. This indicates that SCHW tends to rebound moderately over short to medium terms after experiencing significant intraday declines.

Buy the Dips or Wait for Clarity? Schwab’s Crossroads
The Charles Schwab’s 3.01% selloff has created a compelling entry point for long-term investors, but near-term volatility remains a concern. With Franklin Resources (BEN) surging 1.25% and Schwab’s buyback program in motion, the stock’s path hinges on its ability to stabilize above $95.31. Investors should monitor the $96.39 20-day MA as a critical support level and watch for a breakout above $99.59 to validate the $99.35 analyst consensus. For now, the options market favors a bullish bias, but patience is key until Schwab’s earnings or regulatory developments provide clarity. Action: Buy SCHW20250822C99 if $98.50 holds; exit if $95.31 breaks.