You can make aggressive profits on stocks that Wall Street frets over. Here’s how…
Banks based in the U.S. are moving, despite interest rates dropping ever lower.
Why? U.S. banks are the most stable and best capitalized in the world.
…Well, among larger nations at least. Let’s forget the make-believe banks that are safe harbors for scared money in Switzerland, Liechtenstein and so on.
Earnings are coming out fast and furious, is there one that’s waiting for you to sell a put against?
Think like a contrarian—I’m not the only one finding profit in the U.S. banking sector. Turn to a bank Wall Street is nervous about for no reason.
What bank might that be? Synchrony Financial (NYSE:SYF). With earnings coming out on Friday, consensus estimates are for $0.54 a share.
The stock could move on that number, but the big number for SYF is the provision for loan losses.
Synchrony is a major player on private-label credit cards. I have one… I got it at an HHGregg store when buying two flat panel TVs at 0% interest rate.
What’s not to like?
Wall Street is nervous—way too nervous—about increasing default rates and therefore loan-loss provisions. I think the company is doing fine managing risk, and this will be evident in the earnings announcement.
Do a bit of research, and if you agree, look at selling a put expiring this week.
At the close on Friday, with the stock at $28.12, you could have sold a $28 put expiring after the close for $0.50–$0.70.
Let’s assume you got $0.60. If done 52 times a year, that produces an annualized return of 111.43%.
Nope, that decimal isn’t off.
Want more room to breathe? Sell the $27 put. You could still see a potential annualized return north of 30%.
Yep, this is an aggressive play on earnings. So, not only should you think about it, but you should also think about it twice or thrice before pulling the trigger on any trade.