I hope you all had a great Fourth of July – I'm finally back in the office after a much-needed vacation with my family.
To start things off right, I'm sending out a quick trade alert.
I'm updating my targets on DB stock, which has continued to collapse since the last time we checked in. (The market is finally catching up with what Sure Money readers knew months ago.) The overall European banking sector is under serious strain after Brexit, with the biggest concerns remaining Deutsche Bank AG (NYSE: DB), still buried under debt and plagued by scandals, and the Italian banking system. Since the beginning of the year, DB has lost over 40% – it's trading around $14 today (Tuesday). Sentiment around the stock is falling apart and in my view, it could get to $5 – or even below – very quickly.
So here are my new puts…
My Updated Put Targets for DB
- BUY DB January 20, 2017 $5 puts (DB170120P00005000)
- BUY DB January 19, 2018 $5 puts (DB180119P00005000)
As always, I prefer puts as a less risky way to play the short side. Right now, I'm looking at a couple of new puts that are attractive based on current prices. The first has an expiration date in January 2017, the next a year later in January 2018. It's up to you how to play this based on your expectations, but in my view both are good bets.
As I write this, the DB January 20, 2017 $5 puts are trading at around $0.20 and the DB January 19, 2018 $5 puts are trading at about $0.53. Both are a cheap way to short and very profitable.
If DB falls to $5 anytime between now and January 20, 2017, you'll make at least 343% (and over 400% if it drops earlier, which it very well may).
If you choose to buy the longer-dated puts (Jan. 19, 2018), the profits are a bit less spectacular, though still solid – you'll make at least 133%, with a chance at the high 200s if the stock reaches $5 before January 2018.
If you bought the October 2016 and January 2017 puts I recommended earlier in the year, you already had a chance to make at least 277%. However, if you're still holding onto those, don't get rid of them just yet. Add the new puts to your old position.
- HOLD DB October 21, 2016 $11 puts (DB161021P00011000)
- HOLD DB January 20, 2017 $10 puts (DB170120P00010000)
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About the Author
Prominent money manager. Has built top-ranked credit and hedge funds, managed billions for institutional and high-net-worth clients. 29-year career.