NatWest Group Plummets 4.55% Amid QE Tax Proposal Fears – Is This a Buying Opportunity or a Warning Signal?

Summary
• NatWest Group (NWG) trades at $13.935, down 4.55% intraday amid regulatory headwinds
• Intraday range spans $13.70 to $13.98, reflecting heightened volatility
• IPPR’s proposed QE reserves tax sparks sector-wide selloff in UK banks
• Options chain shows elevated implied volatility (34.27–45.65%) and leveraged put options gaining traction

Today’s sharp decline in NatWest Group underscores a sector-wide tremor triggered by the Institute for Public Policy Research’s (IPPR) proposal for a QE reserves tax. The UK’s largest banks, including NatWest, Lloyds, and Barclays, are under fire as the thinktank argues taxpayer funds are subsidizing bank profits from quantitative easing. With the stock trading near its 52-week low of $8.545, traders are scrambling to assess whether this is a short-term panic or a structural shift in banking sector dynamics.

QE Tax Proposal Sparks Sector-Wide Panic
The 4.55% intraday plunge in NatWest Group shares is directly tied to the IPPR’s proposal for a 'QE reserves income levy,' modeled after Margaret Thatcher’s 1981 deposit tax. The thinktank estimates this measure could raise £7–8 billion annually by taxing commercial banks for holding QE-related reserves. With the UK taxpayer already spending £22 billion annually to compensate the Bank of England for losses on its QE program, the proposal has ignited fears of reduced bank profitability. NatWest’s 4% drop mirrors Lloyds’ 3.3% and Barclays’ 2.9% declines, as investors anticipate potential regulatory overreach and profit compression in the sector.

UK Banks Unite in Selloff as Regional Peers Outperform
While NatWest Group’s 4.55% decline is steep, regional banks like Citizens Financial Group and M&T Bank have shown resilience amid falling interest rates. The Banks - Regional sector, as tracked by the S&P 500, has outperformed the broader market with a 12.45% YTD return. However, UK-focused banks face unique headwinds due to the IPPR proposal, which targets their exposure to the Bank of England’s QE program. In contrast, U.S. regional banks benefit from a more stable regulatory environment and improving loan margins, creating a divergent performance landscape.

Bearish Options and ETFs Gain Momentum Amid Volatility
• 200-day average: $12.26 (below current price)
• RSI: 57.24 (neutral)
• MACD: 0.297 (bullish divergence)
• Bollinger Bands: $13.68–$15.70 (price near lower band)

Technical indicators suggest a short-term bearish bias despite a long-term bullish trend. The stock is trading near its 200-day moving average and within the lower Bollinger Band, signaling oversold conditions. However, the MACD histogram’s negative value (-0.031) and RSI’s neutral reading indicate caution for near-term buyers. The options chain reveals two high-conviction plays for bearish traders:

• NWG20250919P15 (Put Option):
- Strike Price: $15
- Expiration: 2025-09-19
- IV: 45.65% (elevated)
- Leverage Ratio: 10.73%
- Delta: -0.721 (deep in-the-money)
- Theta: -0.0098 (moderate time decay)
- Gamma: 0.2136 (high sensitivity to price moves)
- Turnover: 130
- Payoff at 5% Downside: $1.05 per contract (max(0, $15 - $13.23))
- Why It Stands Out: This put option offers a 10.73% leverage ratio and 45.65% implied volatility, making it ideal for capitalizing on a potential 5% drop. The high gamma ensures responsiveness to price swings, while the moderate theta balances time decay.

• NWG20251017P12.5 (Put Option):
- Strike Price: $12.5
- Expiration: 2025-10-17
- IV: 32.09% (reasonable)
- Leverage Ratio: 93.00%
- Delta: -0.162 (at-the-money)
- Theta: -0.00398 (low time decay)
- Gamma: 0.1478 (moderate sensitivity)
- Turnover: 181
- Payoff at 5% Downside: $0.70 per contract (max(0, $12.5 - $13.23))
- Why It Stands Out: The 93% leverage ratio and 32.09% IV make this a high-reward option for a more gradual decline. The low theta and moderate gamma balance risk and reward, ideal for a mid-term bearish bet.

If $13.23 breaks, NWG20250919P15 offers short-side potential. Aggressive bulls may consider NWG20251017P12.5 into a bounce above $13.68.

Backtest Natwest Group Stock Performance

Regulatory Storm or Buying Opportunity? Watch for $13.23 Breakdown
The selloff in NatWest Group reflects a broader regulatory risk rather than a fundamental deterioration in its financial health. With a dynamic P/E of 8.24 and a 52-week low of $8.545, the stock appears undervalued despite today’s panic. However, the IPPR’s QE tax proposal introduces a material uncertainty that could prolong the decline. Investors should monitor the $13.23 support level and the sector leader JPMorgan Chase (JPM), which is up 0.16% today. A breakdown below $13.23 would validate the bearish case, while a rebound above $14.60 (previous close) could signal a short-covering rally. For now, the options market favors defensive positioning, with leveraged puts offering asymmetric upside in a volatile environment.