The Federal Reserve is set to meet next week, and the outcome is of great (perhaps too great) interest to Wall Street. The historical relationship between banks stocks and interest rates — i.e., banks stocks go up when interest rates do — has not played out this time around.
Our Bank of America (BAC) and Citigroup (C) puts are in the money. Rather than roll, I am recommending we accept shares. However, we will be temporarily exiting these positions by selling our shares before the Fed meeting and re-entering the positions with puts once we see how the market reacts.
BAC Apr Week Five (4/29) 38.50 Put
Current Stock Price: $36.57
Net Debit: $6.42
Action: Accept shares
Cost Basis: $44.92
Potential Rate of Return: I am targeting breakeven for this position
C Apr Week Five (4/29) 52.50 Put
Current Stock Price: $49.18
Net Debit: $14.15
Action: Accept shares
Cost Basis: $66.65
Potential Rate of Return: I am targeting breakeven for this position