Market Overview

6 Financials To Watch Before Today's Stress Test (In 2 Charts)

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6 Financials To Watch Before Today's Stress Test In 2 Charts
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MKM Partners commented on financial stocks Thursday ahead of supervisory stress tests results the same day and the Comprehensive Capital Analysis and Review (CCAR) on March 11.

Derivatives Specialist Jim Strugger noted that financials were the third-worst performing sector this year with a decline of 1.9 percent.

The current steep level of skew across the above stocks suggested "that embedded anxiety ahead of the [stress test and CCAR] results could be unwound resulting in upside for the sector," according to Strugger.

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Looking at the forward price-to-book ratio and year-to-date Performance, Bank of America Corp (NYSE: BAC) appeared as an outlier among JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc (NYSE: C), Goldman Sachs Group Inc (NYSE: GS), Morgan Stanley (NYSE: MS), and the Select Sector Financial Slct Str SPDR Fd (NYSE: XLF).

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Bank of America "now trades 0.74x forward consensus book value versus 1.3x for XLF and 1.0x the peers included here," Strugger observed.

Strugger commented that the "one-month skew is the flattest of the group on a relative basis," which implied that investors "may think BAC's pullback has run its course."

In terms of a trading idea, Strugger liked buying the June 17 strike, 30 delta calls at $0.34 for long directional exposure.

Bank of America recently traded at $15.94, up 0.63 percent.

Latest Ratings for BAC

DateFirmActionFromTo
Dec 2016Standpoint ResearchDowngradesBuyHold
Nov 2016Deutsche BankMaintainsHold
Nov 2016Keefe Bruyette & WoodsUpgradesMarket PerformOutperform

View More Analyst Ratings for BAC
View the Latest Analyst Ratings

Posted-In: Jim Strugger MKM stress testAnalyst Color Analyst Ratings Trading Ideas Best of Benzinga

 

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