The back-story: Last week, I mentioned to members of my service that I was bullish on the financial sector – as yields have been going down, banks have been going off — and was staying away from the tech sector due to its massive market cap which can flex in either direction based on a good or bad earnings report.
After hunting through the banking stocks, I found Regions Financial Corp. (RF), and bought 500 shares on July 25 on a catalyst play, as the company announced a dividend increase the prior day.
Why shares instead of options: I would have preferred to trade options on RF, but the options chain was too tricky to trade off, and therefore too high risk. Just because you’re an options trader and see a stock you like doesn’t mean the options chain will be right; sometimes you have to pass on a trade or just buy the shares if you really want it, as I did with RF.
What’s next: Markets are extended and I have no desire to lose money; it has been a green summer overall and I plan to keep it that way, so I have set my stop at break-even now on RF and I am looking for the stock to make a move over $15.
That said, with a small profit in place and Apple (AAPL) reporting earnings tonight – which could move the entire market, even the financial sector, if the news is disappointing – I’ll likely take my profits today. After that, RF will be on my watch list – with several other big financials – waiting for me to find the right conditions to trade it again.
Davis Martin is the head trader at Dailyprofitmachine.com. He trades SPY calls and puts and swing trades individual stocks and stock options. At the time this article was published on RagingBull.com, he had 500 shares of RF – representing his first trade in the stock this year – and was planning to trade it as described here. He had no shares, options or open orders in AAPL.