Liz here with the official 40th issue of Trading Today – congratulations on making more money here over the past 40 days than you would in 40 years of bank interest.

I recall being a little kid running through the aisles of Party City, having just learned how to read, and inspecting all the “Over the Hill” 40th birthday decorations with great interest. One of the party favors was this little voodoo doll imprinted with various aging-related ailments, and I remember staring at its crotch and sounding out the words “e-rec-tile dys-function.” Ah, memories.

Time sort of flies when you’re sort of having fun.

ANYWAY, today is once again Money Calendar Friday….and speaking of the 40s, Tom’s play from last Friday, DIA, is up about 46% right now. Hang onto that and wait for it to get to at least 50% (I would, anyway).

As part of our 40th birthday bash, Tom’s got a bit of a “bank duel” going on with Tim Melvin today. Tim’s all about buying and holding smaller banks as “the boring way to get rich,” and Tom’s focusing on bank earnings and a quicker pop in the SPDR S&P Regional Banking ETF (KRE).

To be honest, I see this as less an epic rap battle of history and more as a kind of dad duel, with midlife crisis flexing over who’s better at grilling or making perfect lawnmower stripes. (I would actually pay to see this as a TLC show.)

FRBK and NECB – two of Tim’s boring little bank stocks – are already up a couple of percent since he recommended them, so Tom’s got a tad of catching up to do…

But he sees a 100% “Nickel Slots” in KRE, plus an extra 45% coming in Dollar Slots (there’s that number again).

Here’s how to grab a quick triple-digit win on today’s large, liquid ETF…

If Anyone’s Having A Midlife Crisis, It Isn’t The Money Calendar

Tom already owns a Ghostbusters-style “Options Tools” vehicle that beats the standard red Corvette all hollow, so he is vastly ahead of the game here. He sent me a great writeup yesterday, so I’ll let him explain.

Here’s Tom:

“I wrote in Power Profit Trades last week how stocks in specific sectors act like a group of kids in a family. When one gets the cold or measles, they all get a cold or the measles.

“When one stock in a sector reports they beat their earnings and are raising guidance (or the reverse) many other banks in the same sector (family) tend to do the same.

“That is what is going on overall in the Banking Sector right now…

“Last week JP Morgan Chase, (NYSE: JPM), Bank of America Corporation (NYSE: BAC), US Bancorp (NYSE: USB), Citigroup, Inc. (NYSE: C), Wells Fargo & Company (NYSE: WFC) and Morgan Stanley (NYSE: MS) ALL beat their earnings estimates.
This week Fifth Third Bancorp, (NASDAQ: FITB), KeyCorp (NYSE: KEY) and many other financial services and bank stocks reported earnings beats.”

That means a rising tide in banking right now – and a couple of nice Money Calendar gains for us.

As is typical on Money Calendar Friday, Tom likes to pick a large, liquid ETF to bet on a sector – and in this case it’s the big bank basket, SPDR S&P Regional Banking ETF (KRE). I’m actually kind of curious whether Tim secretly owns this, too – I might text him and see.

And now, here’s Tom’s Money Calendar chart…and what that data is telling him.

(I’m excited because I get a bona fide Money Calendar screenshot two weeks in a row. It’s the small things.)

Chart Description automatically generated with low confidence
  • It shows an accuracy of 90%, which means it has traded higher 9 of the past 10 years.
  • Its Avg. Profit or Price Move is $2.91.
  • It has a positive number for its Power Meter, which means its Avg. Price Move in the most recent few years is larger than its 10-year Avg. Price Move. (Good recent price momentum).
  • And it is expected to move higher from the open price of the 22nd to the end date of November 30th.

That type of data was good enough to push DIA up 45% in a week (I love seeing the Ghostbusters machine at work), and good enough to net you 110% earlier this week.

Tom expects it to work the same voodoo on KRE. Just stick that little pin right in the “Bread Basket.”

Two Ways to Play Pin the Wheel on the Corvette

One thing that always amuses me about Tom’s Money Calendar Friday plays is that often, his Nickel Slots play has a higher projected gain than his Dollar Slots. I mean, who wouldn’t take less risk for more money?

But you do you. Go for the biggest, gaudiest Christmas lights on the block. This is the battle of dads, after all.

Tom’s Nickel Slots play – a Call Debit Spread — can net you over 100% even with a whole bunch of hedging. Here’s his explanation of how it works:

“Net Debit means spend up to $1.39 per contract, but not a penny more.
This spread is 3-point wide and the most one can make in that spread is the difference between the strikes or $3.00 per contract.

“If one makes $3.00 on a cost of $1.39 therein lies a potential 115.83% ROI.
KRE needs to be above the sold strike of the spread at expiration to see the prospect of max profitability.

“You see the markets have the right to ‘call’ the ETF away from you at $74. Should they do that your account has the right to ‘call’ the ETF away from the markets at $71 to deliver at $74, making the $3.00.

“The markets have the right to call the ETF away from you at a lower price than it is on the open market and that is likely to happen – cool – your account calls it away at an even lower amount and you get to pocket the difference.

“Again, that profit is offset by the cost of the trade up front of $1.39, resulting in a difference / max profit of 1.61, or 115.83% ROI.

“This is called Exercise & Assignment and should happen automatically, but it’s always wise to confirm the process and how it works at your brokerage.” (Actually, Tom said “You better confirm!” but I changed it to “It’s always wise” because I just can’t leave well enough alone, honestly.)

Here’s Tom’s screenshot:

Table Description automatically generated

And here’s what to do:

NICKEL SLOTS Action to Take: Buy to Open a KRE Dec. 03, 2021 $71 Call (KRE211203C00071000) and Sell to Open KRE Dec. 03, 2021$74 Call (KRE211203C00074000) for a Net Debit of $1.39 or $139 per contract. Enter as a Good-til-Canceled (GTC) order.

On to “Dollar Slots,” the 45% win that you’ll risk more to make! As I said, break your neck with those Christmas lights. Even better, buy my grandpa’s midlife crisis purchase, a mini Suzuki motorcycle that can give your granddaughter’s leg a legit exhaust burn.

Here’s Tom:

This is a bit lower than the closing bid price of the option, but if KRE dips just a bit this has a chance of being bought to open at that price.

The Avg. Profit or price move from Money Calendar is $2.91, so if one adds that $2.91 to its closing price of $72.02 that would set a target for KRE in my eyes at $74.93.

In a world where KRE is at $74.93 based on Intrinsic Value (IV) or Real Value alone (not factoring any time value in the premium of this option that would put KRE $3.93 In The Money or be worth at least $3.93. That would have the possibility of being a gain of $1.23 or ROI potential of 45.5%.

Tom adds a bit belligerently (dad flex!) “I hope my past trades from all other resources where we at times we see 100% gains haven’t spoiled you to where a 45.5% potential ROI isn’t good enough for you.”

Here’s Tom’s screenshot:

Graphical user interface, text, chat or text message Description automatically generated

And here’s what to do:

DOLLAR SLOTS: Action to Take: Buy to Open KRE December 03, 2021, $71 Call (KRE211203C00071000) for a limit of $2.70. Enter as a Good-til-Canceled (GTC) order.

Oh, and Tom also wanted to make sure I included this note about last week’s DIA play. In addition to the call, which is, as we’ve said, up 45% and change, the Put Credit Spread also looks like it’s in good shape.

“Regarding the $338/337 Put Credit Spread at $0.09 or $9 per contract: So long as the DIA market price stays above the sold strike number or $338 the markets will not want to ‘put’ the ETF to anyone at a lesser price.

“If DIA stays above $338 an account isn’t at risk of the markets putting it to that account for less than $338 so that option expires worthless. No need for the account to exercise putting the stock to the market at $337. Hence, both options expire, and the account gets to keep100% of the premium sold to open or in this case the entire $9 per contract; and on a 10-lot that’s $90!

“Hey, that could be your banking fees paid over the next month or so!”

Shots fired, Tim Melvin. The cornhole beanbag is in your court.

Happy 40th! I’m off to nurse my Charley Horse (I actually first learned that was a thing from the voodoo doll in Party City, as well). We’ll be back on Mark Monday with a brand-new play from Mark Sebastian.

Hang loose and have a great weekend!

Notify of
Inline Feedbacks
View all comments