There are two major events in the very near future that could affect our bank stock positions.
The first is tomorrow’s Consumer Price Index (CPI) report. The previous report led to a massive sell-off in the broader market. It’s possible investors have come to terms with the fact that inflation remains elevated, but this is too great a risk to take given that the CPI report will be followed up on Friday by earnings from major banks.
Therefore, I am recommending we temporarily exit our Bank of America (BAC) and Citigroup (C) positions to avoid these risks. We will-re-enter the positions by selling puts once we see how the market responds to inflation data and bank earnings.
BAC Oct Week Two (10/14) 32.50 Call
Current Stock Price: $30.13
Cost Basis: $40.51
Action:
- Buy to close the BAC Oct Week Two (10/14) 32.50 Call for around $0.07, but adjust as needed to close today
- Sell shares at market
Net Debit: $10.45
Potential Rate of Return: I am targeting breakeven for this position
C Oct Week Two (10/14) 45 Call
Current Stock Price: $40.96
Cost Basis: $64.02
Action:
- Buy to close the C Oct Week Two (10/14) 45 Call for around $0.15, but adjust as needed to close today
- Sell shares at market
Net Debit: $23.21
Potential Rate of Return: I am targeting breakeven for this position