The hottest postelection trade isn't cooling off yet, and one trader is looking to cash in on a further rally for the financials.
Financials have been the best-performing sector leading out of November's election, surging over 18 percent since then. And according to Todd Gordon of TradingAnalysis.com: "The end isn't in sight for this bull run," especially as the Fed's recent rate hike is set to benefit financials.
"We have interest rates that are continuing to press higher," Gordon said Tuesday on CNBC's "Trading Nation." "[This] will help [banks'] net interest margins, which will help increase their profitability."
Higher rates tend to be good for banks, and the Fed's decision to raise rates and guidance that it will look to raise rates three times in 2017 leads Gordon to take a look at Citigroup. The bank has also soared about 21 percent since the election, and Gordon thinks that it can overtake recent highs. On a long-term chart of Citigroup, Gordon points out that its shares are currently touching Citi's highs from July 2015 of around $60, just under a "resistance" of $62.
Based on recent "support" levels that Gordon says are sitting just below that $60 level, Gordon sees Citigroup actually breaking past its 2015 high and even through the $62 resistance. In fact, he thinks Citi might be able to rally to hit $65, more than 7 percent above Citi's Tuesday trading levels.
As a result, Gordon is looking at the January monthly options to make his Citi trade. He wants to buy the January 60-strike calls and sell the January 65-strike calls for a total of $1.72 per share, or $172 per options spread. In order for Gordon to make money on the trade, Citi would have to close above the breakeven point of $61.72. But if Citi were to close above $65 on Jan. 20 expiration, Gordon would actually make $328.
This means that Gordon could actually almost triple his money should Citi, and the financials, continue their stellar postelection run up.
Trader takeaway: Gordon sees more room to run for the financials, and likes Citigroup in particular. He is buying the January 60-strike calls and selling the January 65-strike calls for $1.72.
