Options Trading News

June 4, 2013  Tue 8:14 AM CT

No, you don't flee the banks here. You buy 'em.

They are the ones with the most to gain from any bounce in rates, and I have to believe that this group was simply due for a harmless pullback.

Now we know what the issue is here. One look at Toll Brothers tells us that people have decided that the mortgage market's done for. But what I think people don't understand is that the country's got enough pent-up demand that the idea that anyone will be dissuaded from buying a house with these new rates is just, well, ludicrous.

TheStreet.com logoWhen rates were this low there were plenty of people who were tempted and came off the sideline. The big difference now? The asset you are buying is gaining value, not losing it.

I think that today is a contrary rally as people are trying to circle back to the bond market equivalents. I think that's a big mistake to circle back to them. You need a clear differential between where rates are and where stock yields are. And right now we don't know we can't be sure, because if the Fed has lost control of the process or if the Fed's not going to buy bonds, then the risk of a stock's fall wipes out any gains you have from that dividend.

But the insurers. Buy the banks. Don't mess with the bond equivalents. It's too early to do so.

Disclosures: Cramer's charitable trust has no positions in the stocks mentioned.
Share this article with your friends


Premium Services

Archived Webinar

Education & Strategy

The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

View more education articles »