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Trade of the Day: Citigroup (C)

Cash in on this momentum play


My Power Stocks system, which identifies the best candidates for option trading or short-term stock trading, is showing great strength in bank stocks. The system uses multiple regression analysis and other statistical tools to unearth the few liquid, volatile stocks that are building momentum and poised to make a quick burst.

My system rated Bank of America (NYSE:BAC) and Citigroup (NYSE:C) as “Powerhouse” stocks—that is, they are the strongest stocks under surveillance. JPMorgan Chase (NYSE:JPM) received the next-highest rating, and merits a buy on further strength.

However, only the options in Citigroup meet my two vital criteria: They are be low-priced (which reduces your risk), and they have a good probability of profit. C is already beginning to rally up after trading under $36 throughout November, and is now testing $40. It’s a good time to get in on the momentum.

Recommendation: Buy C Feb. $42 call options at $1.23 or lower, when the stock price is around $40.20. After entry, take profits if the stock price hits $43.10 or the option price reaches $2.70. Exit if the stock price closes below $38.80 or the option price falls to 80 cents.

This trade has a 23% probability of hitting the $2.70 profit goal, given a totally random market. In a bullish, risk-on market like we are seeing now, that probability doubles.

Paying the correct price is critical. Do NOT pay more than the recommended price.

If possible pay less than the recommended value. As of the premarket Wednesday morning, these options are still trading under a dollar, so if you buy now, you’ll save money and make more.

InvestorPlace advisor 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.  Try Maximum Options today for 2 months for only $99.

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