Posted in
Daily Report
By: Tom Gentile
on March 16th, 2023
By now, you all have likely heard of and seen the banking crisis going on and the major sell off going on in financial stocks.
It may be more isolated to the regional banks versus the major banks, but almost every security in the financial sector family is getting hit.
The ETF that tracks the regional banks is the KRE. It is the SPDR S&P Regional Bank ETF and if you take a look at this chart you can see the damage being done.
You can look at many other stocks in the same sector and see a similar chart.
The question now is have we seen a bottom in these stocks. Keep in mind even if a bottom is put in or is starting to be put in, these stocks can hover down here at their current lows and just meander sideways until conviction from financial market bulls steps in and start buying.
Should a bottom take hold and buying comes back to the level to start pushing these higher in price we will look for reversal patterns to indicate that.
Regional Bank Rescue Plans
The bank First Republic is the possible beneficiary of larger banks stepping in to deposit $30 billion in it.
This seemed to be a vote of confidence for things if not getting better at least helping out and this type news is being attributed to the reason the market turned higher, seeing the Dow popping up 370+ points on the day.
Credit Suisse another bank stock getting beat up made the announcement they will borrow up to nearly $54 billion from the Swiss National Bank to assure short-term liquidity.
There may be more situations like this coming down the pipe, but until then things are still going to be tenuous for the sector. Today, though, this news helped the KRE move up 3-3.5% or more on the day.
Be Careful Getting Back in to Financial Sector Securities
Below is the Morning Report List of stocks or ETF’s whose options are deemed Expensive.
8 of the top 10 securities with Expensive IV are those from the financial services sector.
When you compare their current Implied Volatility (IV) to that of their High (over the past 52 week range), you will see they are all at or near their high. Meaning the options are more expensive than normal.
They may be enticing due to their share prices looking to be on sale, but to go long options you risk the IV getting crushed or sucked out of the option premium and that can cause a reduction in price and end up trading lower than your option purchase price despite what the share price does.
We would rather lie low and wait for the IV to come out of these before considering going long. The prices have already pulled back, let’s now wait for the IV to do the same before considering taking action.
App: Toms Option Tools
Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.
Other times I will have other charts may work to amplify my educational points.
Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.
Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.
Disclaimers
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.
Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.
This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.
You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any I, investment decision made, or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.
Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.
Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.
A full disclaimer can be found here: http://www.tomgentile.com/legal_disclaimers.html.