Trade Alert: Betting Against Another Bank

Taking advantage of today's post-CPI rally.

Betting Against Another Regional Bank

In a post last month (“Betting Against Banks”), I wrote that there were two reasons to bet against banks now:

Two main reasons. First, the Federal Reserve’s new, post Silicon Valley Bank collapse assistance program, The Bank Term Funding Program (BTFP), has expired. And second, the Fed’s first rate cut—initially expected in the first quarter of this year—has been pushed off indefinitely due to persistent inflation. So banks still have to compete for depositors with higher yielding money market funds.

The first reason is still true, the second reason perhaps slightly less so after today’s CPI numbers came in a tiny bit better than expected (e.g., the month-over-month CPI at 0% instead of the 0.1% expected. Now, Goldman Sachs is expecting that first rate cut in September. Nevertheless, money market fund yields will still be high enough to present a problem for banks.

Today’s Bearish Bank

Today’s bearish bank came from the same Chartmill screen we used in our previous bet against banks:

• GICS: Financial.

• Has options

• U.S. only.

• Health Rating: < 2 (on a scale from 0-10).

• Piotroski F-Score: 2 or less (on a scale from 0-9).

• Technical Rating: 4 or less (on a scale of 0-10).

This one had a Technical Rating of 0 and a Health Rating of 0. Then I did a bit of research to see if there were any potential bullish indicators that the screens missed, and I didn’t find any. I put it a GTC limit order for a bearish options bet against this one a few weeks ago, and it just filled today.

Details below.

Our Bearish Regional Bank Bet