After Shakeout, Banks Positioned For Year-End Run, Citi Most Attractive


Trading Strategy: Long the C December $52.50 Calls at $2.25 or Better

Net Debit/Credit: Debit of $2.25

Profitability Zone: C Shares Above $54.75 on December OpEx

Greeks: Delta 61.7; Gamma 9; Vega 8; Theta -1 

Options Volatility / Trade Simulator View:

Technical Analysis: C shares closed above its flattening 200 day MA last week and out of a nice 5 point basing pattern. The weekly chart below shows the channel up pattern and now looking for shares to continue a trend of higher lows and higher highs which would target a move above $60. 

Fundamental Analysis: The $161.5B Bank trades 9.3X Earning and 0.78X Book with a 0.37% dividend yield and minimal short float. Citi is still recovering from the negativity surrounding its 2007-2009 struggles but has shown to be operating very efficiently and with strong credit quality. RBC noted after recent results that credit trends are moving in the right direction and Citi is making headway on its strategic initiatives. On 9-28 Jefferies upgraded Citi to Buy. The strongest part of the earnings report was Citi delivering on its promises of positive operating leverage, revenue resiliency and de-risking. Citi has often been a proxy for emerging market fears among bank investors and seeing signals of those markets stabilizing is a positive for C stock into the end of the year. BAML has a $65 target on C expecting shares to return to Book Value. 

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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