032. PIGGISH PLAY - Short Capital One Financial Corp. (COF)

NYSE:COF   Capital One Financial Corporation
Capital One is a well-known banking-focused financial services company that has improved its operations a bit as of late. Their earnings have been better than in years past and I'm super happy for them.

What they have not done: anything that warrants any part of the recent eye-popping share price appreciation. The real value that I see in Capital One's current situation lies in its C-Suite propensity to initiate personal stock distributions at exactly the worst times in terms of killing its own stocks price momentum. I hate when companies do this because it sort of admits an overvaluation without directly saying so.

In any case, the chart's technical picture is fairly clearly pointing towards a defined move down that captures many points/share in a small amount of time. This is most definitely primed for a speculative put pig-play.

Lately, the market's choppiness has not provided a reasonable environment for short-term speculative calls and puts. For those that have tried using these as a primary vehicle to trade over the past two months, you are probably still pissed at the "glorious" breakout opportunity that teased you for days in a row. Market's been rather horrendous recently, but it is that time of year.

On the bright side, things seem to be opening up, especially on the put side of things. Crazy as it sounds, you're better off at this point looking to short as your default position until an uptrend establishes again on the broader indices. If it does not soon, a crash of varying magnitude and duration will ensue.

On the even brighter side, this play is likely going to pan out irrespective of the broader market's decision, so see below for the Pig Specs:



ENTRY PRICE: Ideally above 168; Anything over 165 will still work though

EXIT: A clearly defined confluence of support lines that will start to manifest their presence as price heads down towards the 120s.


With the contracts still trading at a bargain (as of Friday), you can purchase a relatively high number of these particular contracts above.

The reason this is great news is that you can play these multiple ways and take on different forms of risk. For example, with a strong support confluence, you may miss the chance to sell into peak momentum on the first run down. Since you have a lot of these to play with, you could play it safe and sell the initial bounce off of this area for a very nice profit, rather than hope to get close to that area again before expiration.

Similarly, if you catch the optimal momentum selling point at its earliest juncture, you can hold a set amount with the hopes that it completely breaks through due to extreme initial momentum for a major bagger.

The possibilities of this trade are only limited by your ability to be creative, which in this case, is my ability to be creative.

The moral of the story is that Capital One is a banking stock that is trading in the realm of price to sales multiples more akin to the meme stock family, bitcoin , spacs and all other forms of a healthy economy.


Comment: Right on schedule...
Trade active: I didn't actually move the entry/exit section, but I did not plan this when I initially published the idea. Nevertheless, this trade looks good to 115.00 PT.

See below for updated techs:

Trade active: Just took a big put position for 1/14 and 1/21 expiration (strikes at 155 and 153.50, respectfully).

I see the financial stocks as a very nice swing trade into tomorrow, so would act quickly before the discounted opportunity gets swept away with the rest of the market.
Trade active: Just in JPM puts as well. 160s for this and next week. GL.