This Beaten-Down Bank Offers 60% Upside By April

Financial InstitutionCash in at the bank to the tune of 60% or higher returns this April by placing the simple stock substitution option trade detailed in this article that has much less downside risk than owning shares outright.

European markets have seen challenges threaten economic growth. The Greek crisis flares up over and over, unprecedented refugee costs cut into budgets, and the British exit fiasco has an uncertain impact on Euro zone trade.

The “German Bank”, Deutsche Bank (NYSE: DB), has lost half of its value in the last year. Fears of ‘too big to fail’ caused global markets to flail at the end of September when a bail out banter was bandied about.

DB had been highly correlated to the iShares EWG Germany Exchange Traded Fund before both peaked in 2014. Deutsche had been down since… now at levels not seen in recent history.


Discounted DEUTSCHE BANK was a $35 stock in July of 2015 before this free fall flight as it fights an old battle. The dubious $14 Billion dollar fine from U.S. regulators is for Financial Crisis mortgage malfeasance almost a decade ago.

DB has more than $3 Billion set aside for this potential penalty making the rumored $4 Billion settlement seem suitable for all parties. This stock has suffered as a scapegoat for industry ills when others have been able to rebound and rally, putting the past in the past…

Technical trade has travelled from $12 to $15 in four months as a bottom base may be in place. The first objective is the $18 measured move target, just above the end of June top.

Reward to risk at these levels favor a bullish bounce on any short covering squeeze.


Let me show you how to have a lot of time to be right by positioning for a 60% return using a limited risk option. This proposed play also has lower investment cost and dollar risk than buying the stock shares outright.


A stock substitution strategy using options ties up less capital and has absolutely limited risk to the premium paid. Using options instead of buying the shares also has greater staying power for long-term trend development.

The April options contracts give us six months for a Bullish development in Deutsche Bank stock.

An In-The-Money option gives you the right to long the shares from a lower strike price and costs much less than the stock itself.

The Options Way: Unlimited Upside Potential with Limited Risk.

A DB long call option can provide the staying power in a potential bullish trend extension. More importantly, the maximum risk is the premium paid.

One major advantage of using long options instead of buying or selling shares is putting up much less money to control 100 shares — that’s the power of leverage.

With DB trading at $14.60, for example, an In-The-Money $10.00 strike option currently has $4.60 in real or intrinsic value. The remainder of any premium is the time value of the option.

Trade Setup: I recommend the DB April $10.00 Call at $5.25 or less. Only a close in the stock below $12.00 on a weekly basis or the loss of half of the option premium would trigger a position exit.


An option play also has staying power with the ability to ride through ups and downs that would force most stock traders out of the position. The April option has six months for bullish development.

The option also behaves much like the underlying stock with much less money tied up in the investment. The Delta on the $10.00 strike call is 85%+ meaning it moves nearly one for one with the Deutsche Bank stock price.

This long option is like being long for the stock from $10.00 with completely limited risk. DB has not been down at the $10.00 price in the last decade.

The maximum loss is limited to the $5.25 or less paid per option contract, with a stop loss exit at half of that premium paid to limit dollar risk.

The upside potential, on the other hand, is unlimited.

The DB option trade break even is $15.25 or less at expiration ($10.00 strike plus $5.25 or less option premium).

A modest move to the $18 measured move target ($12-$15 range on top of the upside breakout) would value the position at $8+ for a 60% gain.

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Note: The author of this article is Alan Knuckman.

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Category: Options Trading Strategy

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The author of this article is a contributor to Investors Alley.