Carter Worth And Mike Khouw's Wells Fargo Trade

On CNBC's Options Action, Carter Worth analyzed charts of Wells Fargo & Co WFC and he concluded that the bank may be ready for a bounce back after the recent decline in price.

Worth compared the performance of Wells Fargo with the performance of KBW Bank Index and the S&P 500 Index and he showed that the spread between them is growing and that the stock's relative performance to the indices is poor. He has also presented a daily chart and he showed that a triple bottom pattern could form soon, which is, in his opinion, a sign to initiate a long position and make a bet that a reversion to the mean could happen.

Mike Khouw commented that Wells Fargo isn't cheaper than Citigroup Inc C and Bank of America Corp BAC and he said that its valuation is close to the valuation of JPMorgan Chase & Co. JPM. Khouw thinks that there are fundamental reasons to consider a long position in the name and he thinks that the best way to do it is by using options. He wants to buy the December 45 call for $1.45. The trade breaks even at $46.45 or 5 percent higher from the current stock price.