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Today I’m recommending a bullish trade on Zions Bancorporation (NASDAQ:ZION). ZION is a financial holding company whose assets total over $65 billion, and it serves a total of 11 states.
One of the stories that didn’t get much press last week was that the yield on the 10-year Treasury note rose to a high of 3.1%. I’ve said before that a 10-year yield above 3% would be a negative for stocks, and I still think it will be eventually, but right now I think it signals a strong U.S. economy.
Furthermore, smaller regional banks like ZION can and should benefit from rising interest rates as net interest margins — the difference between the interest paid to the bank and the interest paid out by the bank — rise.
The Financial Stability Oversight Council recently announced it will grant Zions Bank’s request for relief from strict oversight after its merger with ZION, its parent company. The merger is expected to eliminate redundant regulatory efforts, and given current market conditions, a bullish trade is in order.
From a technical perspective, ZION has a lot of support at the $51 level, which I do not think will be broken to the downside. And with yesterday’s decline in the stock, put premiums increased to the point that we can earn a nice return by selling a put on the name.
Sell to open the ZION Oct. 19th $50 put at about $0.35.
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Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
