Easy $1600 Option Trade In Schwab In 1 Week 

The Silicon Valley Bank collapse and the issues with Credit Suisse, one of the staples in the world’s banking systems, has struck fear in investors.

What is next? Is the banking system going to collapse or is this just a blip in financial markets going forward? 

In this post we discuss: 

• What do we know about the banks after this recent Silicon Valley Bank collapse and Credit Suisse bailout situation?
• How do we do our homework and determine what to do in the bank stocks now?
• How do we place an option trade in SCHW to profit in the short term and long term?

Hey guys, Darren here. Thanks for reading. 

We talk about action steps you can take today to increase profits and reduce risks in your portfolios by trading options. 

Real quick: Please check out and download the FREE options Workshop in the link below. It talks about the two main reasons why options can be less risky and more profitable than just buying stocks alone. It also details how to profit in both directions and pick your win percentage which you can’t do just buying stocks alone. 

DISCLAIMER, I am not a financial planner and I am not recommending trades. Please do your own research and if you are new or learning options, I recommend you start small.

What do we know about the banks after this recent Silicon Valley Bank collapse and Credit Suisse bailout situation?

Silicon Valley Bank

SVB had a very high percentage of their money loaned to Tech Startups. 

Back in 2021 and early 2022 SVB took nearly $100B and invested that into government backed bonds with a significant portion locked away for 3-4 years at an interest rate of just 1.79%. 

So they basically made a bet that the Central Bank was not going to raise interest rates as fast as they did. When they were wrong it put them in a very dangerous position. SVB was now in the Red on all of this money since bond value is based on their yield. 

Credit Suisse

Credit Suisse recently said they had found “material weakness” in its financial reporting in 2021 and 2022.

In addition, Credit Suisse just borrowed 50 billion Swiss francs from the central bank. So Credit Suisse currently “meets the capital and liquidity requirements imposed on systemically important banks.”

I am not interested in being a part of Credit Suisse’s transformation plan. However, it does look like it is stabilizing.

Warren Buffett once said that it is wise for investors to “be fearful when others are greedy, and greedy when others are fearful.”

And it would be a disaster for all if the world’s banking systems failed. So there are many levers in place to prevent that from happening.

We also should do our homework.

How do we do our homework and determine what to do in the bank stocks now?

I will put a link below to a video we just did covering the homework in the bank stocks.

Silicon Valley Bank Collapse – Bank Stocks LEAPS Option Opportunity

Basically, it shows that the banks have low PE Ratios so they are cheap. They are even cheaper now! 

The earnings and revenue growth is expected to be positive in the second half of 2023. However, it may have moved to the right by a quarter or two after this most recent news this week.  

But coming out of a recession in a higher interest rate environment, the banks should do well.

Why Trade Schwab Now?

First off, let’s discuss why Schwab and why did it drop recently?

The financial services giant sank lower after news of a potential block sell-off of 8.5 million shares of Schwab stock, run through JPMorgan Chase.

Many now are saying the Schwab sell-off was overdone, and now have a buy  rating and price target in the $84 range.

Do we think Schwab is going to collapse? Have they done any of the risky things that Silicon Valley Bank and Credit Suisse did? I don’t think so. 

Schwab is not loaning 90% of their money to Tech Startups. They also do not have the lawsuits that Credit Suisse has had. Schwab has a much more diverse deposit base with many clients that invest their 401K’s and retirement accounts automatically and basically just leaves it to grow.

As we outlined in previous videos, the financials currently have very low PE Ratios so they are on sale. When the banking system does calm down as expected since the government and the world cannot have it collapse, financials often lead the way out of recessions and do well in a higher interest rate market.

How do we place a LEAPS Option Trade in Schwab?

So how do we place a LEAPS Option Trade in Schwab?

Let’s go to the TastyWorks trade platform. It’s the best platform for trading options (I’ll put a link below).

Punch in SCHW in the upper left and make sure we hit the Trade tab in order to see the option chains. We see the stock is currently trading for $57.

We will look to buy a deep in the money Call Option which is called a LEAPS option. I like to go out about 1-2 years so we will click on the June 2024 option chain.

We click on the Ask to Buy the 30 CALL option. We go Deep in the money in order to closely duplicate the owning of 100 shares of stock outright. The cost is $3010. However with the stock price at $57 so there is $27 intrinsic value already built in. 

To buy the 100 shares outright at $57 would be $5700. We are paying a little more than ½ that cost at $3010.

Let’s switch to the curve mode and look at the profit zone. 

If the stock moves from the $57 where it is today up to the $80 range where it was just last month, we should make about a $2000 profit. I think this could easily happen as the Banking system dust settles and people realize that not all of the banks are collapsing.

This is also the target range and many people think it is fairly low for Schwab.

How do we manage a LEAPS Option Trade in Schwab for the short term and long term?

When I have an opportunity like in Schwab where I don’t mind holding the stock or option for the long term I’ll trade against it in the short term to generate more profits.  

So if the stock moves up a little and provides a quick $200 profit on the option, I will sell it and bank the profit. 

To start, I’ll put a GTC (Good Till Canceled) order in buy the LEAPS option on a down day if I still want to be long and am bullish. 

You can see from this option chain that I did this several times just this week to take advantage of the volatility in Schwab. 

I started on the 13th on a big down day and bought the 30 LEAPS option for $23.95. I was able to do this because I knew the fundamentals of the banking stocks that we just covered. Then the next day on the 14th, Schwab moved up and I sold it for a quick $760 profit. 

I actually also sold a 50-55 Put Vertical as well that I still have open today for $180.

Schwab moved down in price on the same day, the 14th, so I bought another LEAPS option. This time it was at a $29.60 cost.

I put a GTC order in at $200 profit and you can see it got filled 14 minutes later at 7:01am.

I then put a GTC order in to Buy the LEAPS at the exact same $29.60 price I did previously. It was filled and then it sold again the next day on the 15th for $170 profit. 

2 minutes later on the 15th at 8:10am I bought it for the exact same price! $29.60. Put in a GTC and sold 5 minutes later for $215.  

I then bought it again for $29.60 at 8:18am on the 16th. It dropped pretty big and this is where most people panic. You need to know how big you can go and your max loss. I was only going to go 2 lots since I have some other financial stock trades on as well so I knew my limit. 

Again I felt comfortable doing this because I did my homework and was comfortable holding the option long for several months or even a year if the stock price did not move up right away. I had confidence in the long term. 

It dropped and I bought a second LEAPS option at $27.85. So now I was at my max. I averaged the cost so 27.85+29.60 / 2 =28.72 

So I decided that I would unload the first one after making just $100 profit so I placed a GTC order at $29.70 and you can see here that it was filled. 

I put the second one on to Sell at $30.70 for a $200 profit and that one is still open. 

So in one week I traded in and out of a LEAPS option multiple times.

We made $1611 total profit in just 1 week placing these trades in the short term with a long term bias.

I admit, it does not always work out this well. However, it is something that can definitely work when we are bullish and not afraid to hold a LEAPS option for a long period.

As long as we do our homework and have an idea of what we are getting into we can use volatility and fear in the market to our advantage.

———————————————————————————– 

Alright guys, I’ve put a link down below for the FREE Options Workshop. Be sure to grab that. It discusses exactly how to profit month after month utilizing option trades like this one.  

Please let me know how you feel about the trade we just placed and what you’re trading in the comments below.