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Despite the slight rally last Friday, led mostly by Apple Inc. (NASDAQ: AAPL), the market overall is still down from where it started at the beginning of 2022. We're still in correction territory, and volatility remains high. One bad report from the more than 460 companies reporting earnings this week, and volatility could spike again.
But if you've been with me for a while, you know volatility's nothing to fear - in fact, it's critical for, you know, actually making money. There's a class of stocks that typically performs well when inflation is helping fuel volatility. It's practically a requirement to make money when the market is bouncing.
I'm talking, of course, about banks.
Mid-cap banks especially have been on a roll, riding the high of the U.S. Federal Reserve's promises to raise interest rates. Higher rates mean banks enjoy fatter margins, buoyed by the additional costs for firms to borrow the capital they need for growth.
So even though bank stocks have generally taken a dip along with the rest of the market, they'll be the quickest to bounce back as soon as the Fed hikes rates. And that opens up some great opportunities to buy the dip and bank profits on a quick trade in short order.
The "play of the day" here is a call option buy that I think is set to surge, and you can get into it for just a buck...
I'm Looking at These Specific Banks
What's on my radar is the SDPR S&P Regional Banking ETF (ARCX: KRE).
This fund gets people exposed to a wide variety of - surprise! - smaller, regional banks as opposed to nationwide chains. Net interest income from loans comprises a much larger portion of revenue for these compared to large national banks - 79% compared to 58% - which means they have more to gain from rising rates.
Currently, the fund is trading at around $71 per share, down from highs around $78 mid-January. But given the general trajectory of bank stocks in this market, we should see it move back up into that territory pretty soon, and that gives us a great option trade to make on the dip.
Specifically, I'm looking at the KRE March 18, 2022 $77 call option, literally trading at a dollar as of Tuesday. Given what we saw two weeks ago, this has a great shot at being in the money by March, and the low price gets you a risk-reward setup to die for.
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As juicy as the KRE trade might be, it's far from the only volatility-driven move on my radar right now.
For Me, It's All About the VIX
I'm always looking for opportunities like these, especially for my subscribers at Profit Revolution. The volatility trading method I've developed over the course of 20 years has helped investors keep making profits during periods just like this one.
I call it the "VIX Traffic Light," and it examines the trading patterns of VIX futures to predict the degree of volatility in the market - will volatility spike, recede, or stay stable? From there, we can figure out exactly how and when to trade.
Right now, VIX futures are in backwardation, or in other words, continually trading lower month over month. That means the VIX light is green and volatility is expected to continue, which makes it a trader's market.
That's perfect for a guy like me who likes quick, profitable, cheap trades. Here's a recent win I scored for my subscribers in the Profit Revolution chat room: on the 28th of January, I posted this:
When I typed this trade, these calls were a measly 10 cents with hours until expiration.
But by 4 p.m., they were up 150% as Apple Inc. blew higher.
This week, AAPL is continuing its run, and I think it could make a move to $180. Every week in the Profit Revolution trading room, I look for calls that can profit just like this one.
I'm working on my next recommendation right now - it'll hit my subscribers soon. I'd love it if you could join us and maximize your profit potential no matter what the overall market conditions are. To get started, click here...
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