Bank-Induced Uncertainty Is Bringing Traders Opportunities

[Trading With Larry Benedict]( Bank-Induced Uncertainty Is Bringing Traders Opportunities By Larry Benedict, editor, Trading With Larry Benedict It’s a déjà vu moment… Volatility is on the rise. Banks all over the globe are scouring their books to check their exposure. And market pundits are racing to connect the dots to come up with their “Next Lehman” moment. It’s enough to scare many folks right out of the markets. Only a week after the nearly four-decade-old Silicon Valley Bank (SVB) went out of business in two days flat – Credit Suisse is teetering on the brink. It’s been saved, for the time being, by a 50 billion Swiss franc ($50 billion USD) injection from the Swiss National Bank. But when you see governments stepping in to bail out banks, you know something is not right. While the biggest banks like Bank of America and J.P. Morgan are looking secure, there could be other failures like SVB and Signature Bank. So, we need to pay even closer attention to the markets now. Our job as traders is to read the play and act accordingly… and to always be on the lookout for opportunity. Recommended Link [Biden and the banks: Is your money “safe?”]( [image]( The recent bank collapses are all anyone is talking about. President Biden said, “No losses will be borne by the taxpayers.” But how is that possible? Won’t the Fed just print more money to pay for the losses? And then the dollar will be worth less? Over the past 20 years, renowned economist Dr. Nomi Prins has leveraged her experience at some of America’s biggest financial firms, including JPMorgan Chase, Bear Stearns, Goldman Sachs… And built a global network of experts. Now, she’s predicting a strange new economic eventthat could mean the difference between a relaxing retirement…or years of frustration…and regret. [Click here to find out how you can come out on the right side of this historic event.]( -- Mispricings and Distortions Market uncertainty leads to mispricing and distorted valuations, as different asset classes and sectors get thrown in together. But this often creates opportunities for traders. To see what I mean, take a look at the following charts (these are not trade recommendations). The first chart shows the SPDR S&P Regional Banking ETF (KRE). It’s an ETF comprised entirely of regional banks. No surprises here with its dramatic fall as the SVB story unfolded… SPDR S&P Regional Banking ETF (KRE) [Image] Source: eSignal Yet it’s not just regional banks that have been marked down heavily. Increased uncertainty has spread into a wide range of other stocks and sectors like the Financial Select Sector SPDR Fund (XLF). Check out XLF’s chart… Financial Select Sector SPDR Fund (XLF) [Image] Source: eSignal As you can see, last week’s action looks almost like a mirror copy of KRE’s. Although panicking investors may be tempted to lump KRE and XLF together, their components are actually quite different. While 100% of KRE’s holdings are in regional banks, only one-third of XLF’s total holdings are in banks. And it holds big banks at that. For example, J.P. Morgan, Bank of America, and Wells Fargo combined represent around 21% of XLF’s total holdings. Beyond its 32% in banks, nearly half of XLF’s total holdings are in Capital Markets (27%) and Insurance (21%). However, much like KRE, the market has also heavily marked down XLF due to the collapse of SVB. This shows how a stock or sector can get mispriced in relation to another. But there lies the opportunity. The key is to identify and capture these mispricing events. And it’s important to be nimble and understand the exact risk you’re taking on. [The One Ticker Retirement Plan Over the Shoulder Demo Now Available]( Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Always Understand Your Risk When I want to trade mispricing opportunities, I use options. If I buy a call option in anticipation of a bounce (or put option for an expected fall), I know the exact risk I’m taking on… It’s the price I pay for that option. Knowing a clearly defined and quantifiable risk before I place a trade is a key part of my risk management strategy. Another part of that strategy is risking no more than 2-3% of my total capital on any one trade. But beyond that, we also need to remember that when volatility is high, a profitable trade can turn into a loser in an instant. So, if we get our trade right, we need to quickly bank our profits when we see them. Regards, Larry Benedict Editor, Trading With Larry Benedict Reader Mailbag In today’s mailbag, a [One Ticker Trader]( member shares their positive experience with Larry’s trade recommendations… I so appreciate the One Ticker Trader. I have had success using Larry’s buy and sell alerts. I have been able to buy options cheaper than Larry’s alert price and I also have been able to sell those for a higher price than Larry’s sell alert price. – Rick T. Thank you for your thoughtful comments. We look forward to reading them every day at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [Can One Stock Double Your Money, During Crisis?]( We saw one of the longest bull markets in history, with the S&P surging well over 800%. But the chickens have come home to roost. The Nasdaq, DOW and S&P 500 are down from their previous highs. But Jeff Clark couldn’t care less. Because he ignores almost every single stock in the market. [Instead, he’s quietly become financially free trading ONE stock… ONCE per month.]( Check it out. Here’s one of Jeff’s recent recommendations… [| “One Stock” | $61 Cost | 390% Gain | 27 Days |]( Now, he’s giving a DEMONSTRATION to show you how to get started with less than $100. [Click here to Watch.]( [image]( [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. 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