Posted on February 21, 2022
Credit cards is what we’re discussing today, in an effort to help you pay down yours.
Have it your way, Mr. Toad.
The trade is speculative and has a wild profit potential of 1900%!
But before we get there, cast your beadies on the following two charts.
They’re the latest revolving credit reports from the Fed, and they show some interesting developments (revolving credit is credit card debt).
And the takeaway is as follows –
In November, U.S. consumers reached for the plastic faster and with greater frequency than at any time in history (top chart).
Then, with a deke that would have made Jean Beliveau blush, that same crowd reined in their spending in December – when they should have let the hogs run free!
Those numbers are damning enough in the economic sphere, but how they relate to our trade today will become crystal clear as we look at American Express’ (NYSE:AXP) chart, below.
We’re going to look at AXP’s raw numbers now, because they also portend ill for the stock.
So why would YOU buy…?
Now look at the chart – the daily for the last year.
It’ll give you a better perspective of where we’re coming from –
Technically, AXP is now doing a standup routine –
And that leads us to propose the following SPECULATIVE trade on the plastic dealers at AXP –
A Jew and His Money heartily recommends you consider selling the AXP March 18th 185/190 CALL spread* for a credit of $3.15 (12.90/9.75) and buying the AXP March 18th 195/185 PUT spread** for $3.65 (6.80/3.15). Total debit on the affair is $0.50.
Rationale: for a $0.50 throw-down, we earn the possibility of pulling in a max $9.50, thanks to some very tight spreads. That’s a gain of 1900%, if we can pull it off.
Max loss on the trade is just $5.50, (difference between the CALL strikes plus the initial debit).
And best of all, AXP has to decline just 5.0% to pay us in full.
Dangers: the trade expires in a month, so the need for some relatively quick downside action is paramount.
That’s why we’ve labeled this one SPECULATIVE.
We’ll consider closing as AXP makes contact with its rising short-term MA, now at 180.
However, if it gets there quickly, we’ll likely hold for more potential downside.
And may G-d avenge the blood of all those the innocents slain and tortured by Erev Rav reshaim.
With kind regards,
High L. O’Haynew