Banks are officially reporting earnings.
What’s happening?It’s the week that many have been counting down, too, while dreading it simultaneously. Banks are officially in the earnings rings, and it is widely expected to turn ugly fast. And many are calling for the worst numbers banks have seen since the 2008 financial crisis.
JPMorgan Chase was the first to report, and the numbers weren’t a great start – but truthfully, not as bad as expected… The nation’s leader reported setting aside $8.9 billion for expected losses but posting better-than-expected income of $4.69 billion. And while the income might be better than expected, it’s still a massive drop down from $9.65 billion a year earlier.
JPMorgan’s shares have plummeted 30% this year. This is slightly better than its rivals, but truthfully, this drop is far more severe than the overall market. The banking sector has been hammered due to the fear that their profits will be wiped out by loan losses and unbelievably low-interest rates.
But despite the predictions, banks are performing better than expected as reports continue to roll out.
Where’s the money?It’s no secret that banks have been underperforming this year. And despite posting numbers that weren’t as grim as expected, the selling continues. Investors are doing everything they currently can to unload shares of this sector.
When I look at the trading numbers, they’re pretty strong. But the question everyone is asking remains – with low rates and loan losses, how will these companies continue to make money?
But that doesn’t matter. Because here’s the thing: this beaten-down sector isn’t done yet. And while most fund managers are chasing TSLA and NFLX, I believe that there are some diamonds in the rough that could be great profit opportunities in the long-term.
And here’s how I would play it…
How can I get some?With such high volatility in the market, options premiums can get a little out of control. The heightened uncertainty is forcing the price traders pay for options up, making the risk to reward ratio of simply buying an option less appealing.
It’s times like these where the Spread trade strategy is particularly useful…
By buying one option and selling another (in the same transaction), we can help alleviate the cost of entering an options trade, while still maintaining an excellent risk to reward ratio.
Today, I’m looking at a Spread trade on JPMorgan Chase (JPM). Yes, the same bank that just reported a 51% drop in profit. But like I said earlier, I am looking to score big in the long term, not the right now. And that’s why this call spread setup is so perfect.
Now, if you like the idea of a spread, I like the JPM January 15, 2021 $115 Calls and JPM January 15, 2021 $120 calls. You would buy-to-open the $115 and sell-to-open the $120 calls, creating a vertical debit spread. This is a great setup because it gives you plenty of time until expiration, especially if you can get in this setup for less than $1.00.
With that said, we’re risking $1.00 ($100) to potentially make $4.00 ($400) per contract. That’s a pretty great risk to reward ratio.
In the Spotlight: This struggling airline continues to struggleDelta has officially posted its worst losses since the 2008 crisis. And they’re not seeing any light at the end of the tunnel for now.
The airline leader originally had planned to add 1,000 flights a day to its upcoming August schedule as many airlines have seen an uptick in bookings for the month of June and July. But Delta has pulled back on the reigns a comeback plan, dropping the number of planned as coronavirus cases continue to increase.
Recent reports revealed that the airline said it lost $2.8 billion, excluding special items. Including those items, Delta’s net loss came to $5.7 billion – a massive hit. In 2008, the company saw a $6 billion loss following the beginning of its bankruptcy. And this loss makes sense as revenue plunged 91% in the pandemic’s peak as the demand for air travel became almost nonexistent.
Now, with that said, just because this stock is downturned doesn’t mean there’s not an opportunity for a nice size profit for us.
So, I’ll be keeping you updated. Stay tuned.
You’ll Be Interested to Hear…My Project 303 readers and I have had quite a week so far.
Yesterday, we added a mobile voice and multimedia company to our lineup, and took our first gain under an hour…And later that day, I issued another alert to secure the rest of the profits, resulting in returns in less than 24 hours!
So if this week’s bank earnings report turns into the spark that really ignites the markets (as many are expecting it to) …The sky’s the limit for Project 303 and the proprietary S.C.A.N. trading system I use to find these plays.
And I want you to be on board before the next market jump. Click here now to learn more.