EOT Trade Alert – October 8, 2015

| October 8, 2015

Trade Alert:

Buy C November 20th 2015 $50.00 puts at $1.50 or better


Company Background:

Citigroup $C is a money center bank and diversified financial services company.


Short-Term Catalyst:

Citigroup and other US banks have been teetering on the edge of revenue growth during the first half of the year.  But the massive drops in asset prices across the board will likely put an end to that in the 3rd quarter.

As you know, a selloff has hit stocks, bonds, commodities, and just about everything else during the 3rd quarter.  That’s not a good recipe for banking profits.

What’s more, the Fed hasn’t raised interest rates.  So, weak net interest margins will continue to depress earnings from traditional banking operations.

In fact, we’re already seeing signs of trouble at Citi.  They’ve sold off several of their overseas businesses in an attempt to mitigate the damage from a weak global economy.

I don’t think they’ve done enough to weather this storm without a significant drop in their stock price.

C will report 3rd quarter earnings on Thursday, October 15th.  I’m expecting weaker than expected revenue and earnings, as well as a lot of talk about the uncertain global economy hurting forward guidance.

The trifecta of poor performance should torpedo C’s stock price and send the value of put options soaring.  Let’s grab put options on C to profit from their 3rd quarter earnings.


Trade Details:

Underlying Stock Symbol: C
Current Bid-Ask Price: $1.40 – $1.45
Option “Buy Up To” Price: $1.50
Break-Even On Stock At Expiration: $48.50
Maximum Risk Per Contract: $150


Exit Strategy:

C is trading at $51.18 per share.  Resistance levels will be at $52.75 and again at $54.00.  Remember, we want this stock to move lower.  Support levels will be at $49.00 and $47.00. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.





Category: EOT Trade Alert

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