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Thursday, October 22, 2020

Fintech wins when bank stocks go down, Jim Cramer says

When money flows out of the financial stocks, the financial technology segment of the market draws interest from amateur buyers, who place bets on their stocks, CNBC’s Jim Cramer said Tuesday.

“Whenever the bank stocks go down, we immediately get a massive amount of option-call buying in PayPal and Square,” the “Mad Money” host said. “The market makers who have to short the calls to them and then short the stock to protect themselves are getting hurt. They’re overwhelmed by endless buying, the likes of which they’ve never seen.”

The comments come after the stocks of JPMorgan and Citigroup — both having announced quarterly results before the market opened — fell about 2% and 5%, respectively, despite posting top- and bottom-line beats in their quarterly reports.

That’s because Wall Street has little interest in owning banking stocks, Cramer said. The sector has been pushed to the limit, given the precarious state of the global economy, and lagged the market all year.

The stocks of Square and PayPal both rallied about 3% on the session, while the major averages snapped a four-day winning streak.

“The buyers won’t quit and the [short sellers] keep getting blasted to pieces because of these novel young buyers who just don’t understand the way it’s done and think they’re being geniuses,” Cramer said. “I don’t know how these buyers get out of their positions, but their willingness to pay up for PayPal and Square is shocking. Professionals hate moving stocks up with their own buying.”

Disclosure: Cramer’s charitable trust owns shares of JPMorgan.

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