I’ve covered Citigroup (C, $21.47, down $0.64) in the past like grass on dirt but lost interest in the stock and any trading opportunities in it after its fall from $55 to $20. The ride on the way down was thrilling to write about and when Citigroup fell below $20, I figured there was not much further it could fall.
While this has been true, it has been interesting to watch how Citigroup now trades. If you’ll notice, the stock seems to trade 20% higher or lower every two weeks or so. The stock spent the earlier part of the year bouncing between $25-$30 and now seems locked on trading between $18-$20 to $25 a share here lately.
And it all has to do with the hype and the way the market spins things. One week “Citi’s recovering nicely” and that “Financial stocks are cheap.” Next week it’s “Financial stocks aren’t out of the woods yet” type quotes.
This is why it can sometimes be difficult to call a stock’s direction with so much debate going on about the stock or sector but it is good for price action. However, there are safer and better ways to take advantage of situations like this by using more advanced options like credit or debit spreads and even iron condors to limit your risk instead of buying calls or puts straight-up. These strategies don’t provide as much bang for the buck but they do limit your losses in case the trade goes against you.
Rick Rouse
Rick@OptionsMentoring.com
