It looks like even the Fed isn’t completely blind to the consequences of its actions. 

Given the path they’ve stuck to for the past year, it wasn’t hard to imagine they’d stay the course.

Ha! Who am I kidding?

The Fed’s backbone has been in question since rate hikes began, and now the consequences of its fight against inflation have led to the lipstick being wiped unceremoniously off some pigs… ahem… banks.

The second and third biggest bank collapses in national history have the government scrambling to stop gap a major financial and economic meltdown.

Time will tell if they’re successful. They also face a disaster in the real estate market resulting from rate hikes. But that’s a story for another day.

For today, our focus is on Jerome Powell’s decision yesterday to slow rate hikes and look to 2024 with no increases. 

More importantly, what trading opportunities does it present us now…

Why I’m Still Long on This Kind of Banking

Today, the Fed interest rate range sits between 4.75% and 5%. 

And the overall banking sector has taken a beating since the start of the SVB collapse.

The thing is, at this point, some equities are oversold. That means they’re ripe for a pop.

As options traders, this gives us the perfect setup to amplify our returns.

Remember, when buying stock, if the share price of a company rises 3% (for example), your gain is… well… 3% (minus any brokerage fees). But when you’re trading options, you pay a fraction of the price to place the trade, and when the stock rises 3%, your gains rise exponentially. 

It’s the difference between walking to profits or taking the bullet train.

Right now, there’s a good opportunity to the upside in the SPDR S&P Regional Banking ETF (NYSEArca: KRE).

Explore the options chains there and watch Profit Takeover on Friday for more details.

Or, buy the ETF stock. It may be slower than options profiting, but any gain is better than a kick in the teeth.

See you then,

Mark Sebastian


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