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Wells Fargo Is Making Shareholders Rich

Now the dividend rate is almost at the price 2009 level of 34 cents. At the current increase trajectory, shareholders will receive the highest dividends ever by the bank within two years. Most of the financial institutions don't have the stability yet to follow.

It's rarely correct to chase stocks higher, and Wells Fargo is no exception. If you want exposure or to increase your position, watch for three down days in a row. After a quality stock retreats three days, you improve your odds of success of gaining a opportune entry.

Options also give investors the tools they need to mitigate risk and remove some of the pressure in timing your entry. For example, take a look at the $42 strike price August put options. They're currently trading for about 65 cents. We want to keep the powder dry until we have a dip in price, which puts our entry price near $1 as a good price to sell at.

Remember, selling an option gives the other party buying the put the right but not the obligation to "put" the stock to you at $42. If Wells Fargo is trading below $42 on the option's expiration day, you should anticipate buying the shares at $42. After the option premium received, your cost basis is only $41 though.

If the shares continue strong, you only make $1, and that's the limit of your profit opportunity. But a return of 2.4% isn't bad for 32 days.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Robert Weinstein is an active trader focusing on the psychological importance of risk mitigation, emotion and financial behavior of market participants. Robert co-founded the investing blog StockSaints, where he writes a journal about his trading activity and experiences.

In addition to TheStreet, Robert also contributes to Real Money Pro, providing real-time trading ideas for stocks, options and futures.

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