Skip to main content

Bank Excess Reserves and a 'Rock' Hard Trade

Yesterday on Fast Money Final Call, Brian talked about bank excess reserves being at extremely high levels. Banks are borrowing at a discount window of zero and they are continuing to build excess reserves. Brian thinks banks need to start lending again. Banks just having the reserves sitting there isn't helping the market, he feels once they start lending, the market will rally big time. If the banks continue to collect reserves and not lend them out, we could see a sideways market similar to what Japan experienced. The banks have almost a trillion dollars sitting in excess reserves, they are taking it as free money and keeping long term rates low. They must start lending again. Also, we have saw a huge move yesterday due to great earnings and a lot of company's raising there outlooks. Brian feels this is sustainable due to the large number of company's with positive earnings.

Bank Excess Reserves

Brian also has a play on BlackRock. Yesterday it was up nicely and the fundamentals looked great. He suggests selling a put to get long in the stock instead of simply buying the stock. The play is to sell the Jan. 120 put for $4.50, which is about a 3% yield vs. the value of the stock. Below 115.5 we are forced to get long in the stock and we are put to the stock at 120. You break even at 115.5 and above there is where you will make money.

Trade on BlackRock

Comments

Post a Comment

Popular posts from this blog

Is the KCJ Foreshadowing a 2008 Repeat?

The CBOE Correlation Index (KCJ) is close to the lowest level we have seen since it was first listed in 2007. The KCJ measures the implied movement of the S&P 500 components options, compared to the implied movement of the S&P 500 index options. Simply put, the higher the number, the more likely all stocks are going to move together. Conversely, a low number will be characterized by sector rotation, and flat markets; one sector moves higher, another moves lower.  (Source: Access Hollywood) Correlation, for lack of a better term, is correlated with volatility. Not surprisingly, 30-day S&P 500 historical volatility is near the low level of 6.5%. Currently at 33.5, KCJ is sitting close to rock bottom, lower than where it was in 2007, (but not lower than where Lindsay Lohan was in 2007).  So far this year, the market has been able to grind higher, characterized by leadership in FANG(Facebook Apple/Amazon, Netflix, Google) and sector rotation. A...
Post a Comment
Read more

I would like to bet ten tens on the tenth horse in the tenth race, please.

"I would like to bet ten tens on the tenth horse in the tenth race, please." Last summer, on a warm cloudy day June 11 ,  2016 in Elmont New York, a good friend of mine (Rob) confidently walked up to the cashier at Belmont and spoke those famous words.  Ten Tens on Ten in the Tenth Race.  In fact, it had been decided it months earlier. We had been discussing hosting his bachelor party in New York, go to the Belmont Stakes, and watch a Yankees vs Tigers game and Rob convinced the group to go to New York by proudly proclaimed his prophecy.  I had almost forgotten about this bold prediction when I witnessed him at the register, but when I looked up, and saw Flintshire, the 10 th horse in the race upcoming race was the favorite.  “What could possibly go wrong?”  I thought to myself (an options trader who bought a racing program attempting to handicap and gain an ‘edge’ in the previous nine races unsuccessfully).  I went to a pretzel vendor and...
Post a Comment
Read more