This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

5 Banks to Consider as Options Plays

Stocks in this article: SPYBACCJPMWFCMSUSB

NEW YORK ( TheStreet) -- For a market not expected to do much before the election, it's hard to deny we are in a bull market. The S&P 500 ETF (SPY) chart is trending higher with the widely followed moving averages all pointing north.

While many market pundits were busy building a wall of worry, others were busy making money. It's hard to say what the SPY and the overall market will do in front of the election, but even with the market giving back gains, many in the banking sector already have low growth priced in.

Banking suffers from future unknowns. Wall Street hates problems without a clear and convincing level of risk exposure. The problems with housing and high unemployment appear to have no end in sight. Nothing out of Congress or the White House suggests a change anytime soon either.

The Libor rate-fixing scandals could snapback and create exposures that may not appear on the radar for any given U.S. bank at this time. Considering the fact that the big U.S. banks are really big global banks means earnings may take hits for some time. Currently, we know Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM) possibly face exposure based on lawsuits that have been filed against them.

Because the banks have many of the problems built into the price, if the storm clouds do pass more quickly than expected (and they will pass at some point, they always do), the payoff could be huge. Banking offers the classic "heads I win, tails I break even" that investors search for. It's far from a sure thing, but when the odds are in your favor you want to exploit it for what you can.

In order to mitigate your risk exposure, take a look at writing covered calls. Writing covered calls will lower your total risk per share, pay you for each passing day as a result of time decay and increase the odds you will make money. The downside is you risk getting left behind if your stock really takes off higher.

This article isn't about hitting home runs, and more for those that want to bring home solid and consistent results. I selected November as my primary expiration month because the expiration date is after the election and gives time for the market to digest the results.

Some banks are better than others so let's take a look and see what we find.

1 of 6

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs