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Trade of the Day: The Charles Schwab Corp. (SCHW)

Recent U.S. manufacturing PMI numbers came in with another big beat. This year is looking a lot like 2009-2010 for manufacturers, which is actually a very good thing for economic growth in the long run. However, in the short run this means expectations for the dreaded-taper jump up and so do yields. Normally, yields and stocks are positively correlated but on a short-term basis it can sometimes attract a few sellers who want to take profits just in case higher rates stunt growth.

When you use options trades to play the market like we do, it gives you a variety of opportunities to because there is a group that does very well when rates rise: brokers and exchanges. We’ve traded TD Ameritrade (AMTD) and CME Group (CME) recently, as well, but at the moment, our top contender in this space is The Charles Schwab Corp. (SCHW).

We like trendline support on SCHW and are recommending calls here. This looks very much like the same situation in June and we think there is a nice opportunity for some gains through the end of the year. Investors will find SCHW attractive because higher yields are good for profits and December’s window-dressing traders will want to add some of the year’s big winners.

Buy to open the SCHW January 25 Calls (SCHW140118C00025000) for a maximum price of $0.85.

In November, we had another short-term options trade in Charles Schwab that netted us a 54% gain in just seven days. We’re very familiar with its chart and how SCHW shares move and are anticipating a move up in the near term.


InvestorPlace advisors John Jagerson and S. Wade Hansen are co-founders of, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news.  Get in on the next trade and get 1 free month today by clicking here.

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