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There was a lot of news driving markets this week. One is the December inflation reports, which the Federal Reserve is watching closely. Another was the slew of earnings from big financial institutions like JPMorgan Chase (JPM), Goldman Sachs (GS), and BlackRock (BLK).
OptionsPlay senior options strategist Brian Overby shares two ways to play those themes. Overby is looking to play the Fed via small caps, given that they are interest rate sensitive. He is looking to use a long straddle strategy with the iShares Russell 2000 ETF (IWM), given that volatility is likely to increase with President-elect Donald Trump taking office.
When it comes to financials, Overby is looking at a long call spread in Charles Schwab (SCHW) before they announce earnings on Tuesday.
"If you look at Charles Schwab, which is a bank and also a brokerage firm and a registered investment advisors, and not to mention they have a plethora of funds, they're covering all gamuts in the space. And over the last month, we've seen a lot of analysts come in and raise their expectations on earnings about 2.5% over that time period. So I want to ride the momentum of the initial bank earnings."
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Learn more about Overby's plays in the video above.
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This post was written by Stephanie Mikulich.