Regional Banks Tank
Submitted via Portfolio Armor:
Regional Bank Shares Slide
As ZeroHedge reported earlier, it's been a rough one for regional banks, not quite Christmas Morning for them, maybe something a little closer to Far East Bank's unscheduled withdrawal in Heat (1995).
PacWest Bancorp (PACW) was the big loser in Tuesday's trading, down nearly 28% at the close, but another loser today was First Foundation Inc. (FFWM), down nearly 15% Tuesday. FFWM was one of the regional banks we bet against back in March in my trading Substack, as I wrote about at the time:
I spent some more time thinking about this on Monday though, and modified those criteria a bit to look for additional, less obvious banks to bet against. Specifically, I used these criteria:
Deposits comprise more than 80% of its liabilities.
Deposits less than $250k (the FDIC deposit insurance limit) as a % of total deposits. I replaced Tier One Leverage Ratio with this, because this seemed more relevant to the recent bank crashes. This figure was 39.7% for Silvergate Capital (SI), 19.8% for First Republic Bank (FRC), 6.2% for Signature Bank (SBNY), and 2.7% for Silicon Valley Bank (SIVB). All three names I ended up with (including my original name) had percentages less than Silvergate Capital on this metric.
A Piotroski F-Score of 2 or less. The two new names I found have Piotroski F-Scores of 1, even worse.
Failing Portfolio Armor’s test of options market sentiment. All three names failed this test.
I got filled on my limit orders for puts on all three of these names today. Details below. [...]
The next bank stock was First Foundation, Inc. (FFWM). I got the $7.50 strike, October expiration puts on it for $1.
Last week, I had placed a good ‘till canceled limit order to exit those puts at $3, and it was filled today, for a 200% gain. To be honest, had I not had that limit order in place, I probably would have held at least some of those puts here for a bigger gain.
I’ll do some more research today and see if I can find another regional bank that’s still worth betting against after today’s drop. If you want a heads up when if I find one, feel free to subscribe to the trading Substack/occasional email list below.
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