Near-Term Trading Opportunity Triggers a New Buy
Year-to-date, financial stocks are down more than 12% as investors have moved toward more defensive sectors. This recent trend has created a great opportunity for financials, which are currently trading at prices and multiples that resemble 2011 when markets were caught up in the fallout from the Greek financial crisis. We feel confident in saying banks are substantially more prepared and capitalized now than in 2011.
Financials have dropped back to the short-term lows this week but have found some support there. Moreover, Fed Chair Janet Yellen’s testimony next week should provide a near-term catalyst for financial stocks. The Financial Select Sector SPDR ETF (XLF) is poised to benefit from this potential rebound. Taken together, we believe this trading environment gives us a favorable risk/reward setup for buying the XLF March $21 calls (XLF160318C00021000) currently priced at 67 cents, which expire on March 18.
Buy XLF March $21 calls currently trading at 67 cents.
Best,
Doug and Tom
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
