Weekly Option Windfall: Financial ETF Offers 29% Return Potential in 1 Month

Core Insights - The Zacks Finance sector is currently ranked 1 out of 16 sectors, indicating strong performance in financial industries such as banks, exchanges, and insurance [1][2] - Incorporating ETFs, particularly the Direxion Daily Financial Bull 3X Shares ETF (FAS), can enhance portfolio returns while managing risk [1][4] Sector Performance - Stocks in the Zacks Finance sector are showing promising characteristics, including relative undervaluation with a PE (F1) of 11.66 compared to the iShares-SP500 at 19.80 and a PEG ratio of 1.54 versus 2.36 for the iShares-SP500 [2] - Projected EPS growth for the finance sector is 8.33%, which is higher than the 6.95% for the iShares-SP500, suggesting better growth potential [2] Investment Strategy - Investing in leading stocks within top industries can significantly improve stock-picking success, as historical studies indicate that the top 50% of Zacks Ranked Industries outperform the bottom 50% by more than 2 to 1 [2][3] - The FAS ETF is in a sustained uptrend, providing exposure to the finance sector and offering daily investment results that correspond to 300% of the performance of the Financial Select Sector TR index [4] Options Trading - Options trading offers flexibility and can be tailored to current market conditions, providing significant profit opportunities with limited risk [6][19] - A specific call option spread strategy involving the FAS ETF is presented, with a total cost of $1,555 per spread, allowing for potential returns even if the underlying stock decreases or remains flat [12][18] Risk Management - The sale of a call option in a spread trade provides downside protection and reduces the cost basis of the option purchase, thus lowering risk [15][16] - This strategy allows for maintaining positions during volatile markets, as the downside protection helps prevent forced selling during market pullbacks [17][18]