Bank stocks surged last week led by huge trading volume of four big banks—Fannie Mae, Freddy Mac, Citigroup and Bank of America. In fact, on Tuesday of last week, these four behemoths made up 40% of ALL trading volume on the NYSE! Insane! Especially considering these companies were kryptonite a few months ago and were a big part of dragging down the market.
It's mind-boggling to see such huge volume by four huge financials that were underperforming the past few months. For example, BAC is trading at around $17 now, but they were at $2.53 in March of this year. In fact the whole financials picture was a lot different this past year. It seems like just yesterday when Freddie and Fannie were nationalized, Lehman went under, then Merrill CEO John Thain accepted bailout funds just after spending 1.2 million dollars to decorate his office and Bank of America nearly literally became the Bank of America. Short memories notwithstanding, it makes one wonder whether these trades are based on speculation or on solid fundamentals. And the $64,000 question is where will they go from here? I was curious to see if the Zecco Community had any insight here. It turns out they were also bullish on these financials last week. In fact, Citigroup, Bank of America and Fannie occupy 3 of the 4 most held positions at Zecco Trading.
So I ask you, what do you think this is all about? Were you one of the bulls trading the financials last week? What’s the best strategy for the financials? Any options traders playing both sides? Let me know your thoughts!