On CNBC’s “Options Action,” Tony Zhang said there is a further upside for the financial stocks going from here. He would trade Wells Fargo & Co (NYSE:WFC), which managed to break out on the upside on Friday. It broke out on an absolute basis and a relative basis to the financials.
The stock is trading at relative highs, so Zhang wants to buy an in-the-money call spread. Specifically, he wants to buy the October $47.5/$52.50 call spread for $2.14. The stock needs to move only around 2% higher for the trade to be profitable. There is also a relatively smaller amount of time decay versus an out-of-the-money call spread, said Zhang.
