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OIB Trade Alert: C

The year is drawing to a close, and I’m sure many of you will be happy to be put this one behind you and start fresh in the new year. 2022 was an extraordinarily tough year for all swaths of traders. From buy-and-hold investors to options sellers like us, almost everyone took their licks

The current down market has been much harder to navigate than the pandemic-induced crash of 2020. We haven’t seen a true bear market like this since the 1970s. In fact, many of today’s investors have never been through a market like this.

Bear markets, while a normal part of investing, are financially and emotionally taxing. As I’m sure you’re aware, people tend to remember their losses far more than their winners. Those losses can haunt you, even once you recoup them.

I never take losses lightly. But there are cases when it’s simply time to throw in the towel and put your capital to better use elsewhere. We have reached that point with Citigroup (C).

We have been in the position since late 2021. While the stock struggled out of the gate, the economic and market turmoil that ensued after Russia invaded Ukraine in early 2022 really hit shares. Citi has more exposure to retail and business lending in Europe than other U.S. money-center banks, which is likely the reason C has underperformed the broader market and the financial sector this year.

The economic outlook for Europe remains dark, and I view the stock as having more downside risk than upside potential. Therefore, I want to book the loss and refocus our capital on more lucrative opportunities.

The strategy we’ve been employing over the past few months has been extraordinarily successful. In the new year, we will continue to look to close positions early to remain nimble amid what is likely to be another volatile year. This loss hurts, but in the long run, the wins really do outweigh the losses with this kind of strategy.

Let’s spend a few cents to close the position now rather than risk being assigned shares.

Current Stock Price: $46.91

Net Debit: $20.36

Action: Buy to close the C Dec Week One (12/2) 47 Put for around $0.25, but adjust as needed to close today

Loss: $20.61, or $2,061 per contract

Rate of Return: –43.9% in 410 days, or -39% annualized

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