$WFC Options Intelligence

## Current Market Regime (October 24, 2025)

• Fed Policy & Macro: The Federal Reserve has recently lifted the asset cap on Wells Fargo, a major positive catalyst for the stock[3]. There is ongoing optimism in the market regarding Fed rate cuts, which generally benefits financials, but the next Fed decision is on October 29, 2025—just five days away—adding potential volatility around that event.
• Sector & Technicals: WFC is up 22.6% YTD, trading above all key moving averages (20-day, 50-day, 200-day), with RSI at 56.88 (neutral), and MACD bullish[1]. The stock is in a clear uptrend, supported by strong earnings and sector rotation into financials.
• Fundamentals: WFC reported $1.66 EPS (beat by $0.11), $21.44B revenue (up 5.3% YoY), net margin 17.18%, ROE 12.51%[5]. Valuation remains reasonable at 13.87x P/E, 1.15 PEG, and a 1.94% dividend yield[5].
• Options Sentiment: Put/Call volume ratio is extremely bullish at 0.08, with heavy call buying. Open interest is concentrated at higher strikes, and Max Pain is at $90, suggesting potential resistance there[1].
• Volatility: IV is elevated (48% vs 10.7% historical), IV Rank 100%—historically high, favoring premium selling. However, term structure analysis shows that near-term (10–40 day) options are underpriced relative to baseline volatility (Clean IV 21–24% vs Baseline 27.4%), creating a buying opportunity in the Nov–Dec expiries. Longer-dated options (Jan 2026+) are fairly priced.

## Trade Recommendation

🎯 BUY WFC NOV 21 2025 87.5/90 CALL SPREAD

Rationale:
The term structure reveals that November 2025 options are underpriced (Clean IV 21.5% vs Baseline 27.4%), providing a statistical edge for buying premium. WFC is in a strong uptrend, with bullish technicals, solid fundamentals, and a favorable macro backdrop for banks. The Fed’s removal of the asset cap is a structural positive, and the stock has room to run toward the Max Pain level at $90[1][3]. The call spread capitalizes on continued momentum while capping risk.

Stock Price: $85.19
Entry: Buy Nov 21 87.5 Call @ $1.20 (ask), Sell Nov 21 90 Call @ $0.40 (bid)
Net Debit: $0.80 per spread

### Trade Metrics

| Metric | Value |
|-----------------|----------------------|
| Risk | $80 per spread |
| Reward | $170 per spread |
| Breakeven | $88.30 |
| Max Loss | $80 (if WFC ≤ 87.5) |
| Max Profit | $170 (if WFC ≥ 90) |
| Win Rate | ~35% (based on delta)|
| Days to Expiry | 28 |

### Term Structure & Volatility Analysis

• Baseline 90-day Vol: 27.4%
• Nov 21 Clean IV: 21.5% (5.9% below baseline = BUY signal)
• Market IV: 22.8%
• IV Rank: 100% (historically high, but near-term options are cheap relative to baseline)
• Calendar Opportunity: Yes—Nov 21 expiry is underpriced vs Jan 2026 (26.0% Clean IV)
• Recommendation: BUY Nov 21 expiry, or consider calendar spread vs Jan 2026

### Greeks & Sentiment

• Net Delta: ~0.25 (moderately bullish)
• Theta: -$2.50/day (time decay against you, but cheap premium mitigates)
• Vega: +$4 (benefits from IV rise)
• Put/Call Ratio: 0.08 (extremely bullish)
• Max Pain: $90 (potential resistance)[1]

### Why This Trade

Term structure is the primary driver: November 2025 options are statistically cheap, offering an edge for buyers. WFC is in a confirmed uptrend, with strong fundamentals and a bullish catalyst from the Fed’s asset cap removal[3]. The stock is above all key moving averages, RSI is neutral (not overbought), and sector sentiment is positive. The call spread targets a move toward the Max Pain level at $90, with defined risk and favorable reward.

Market intelligence confirms: “Wells Fargo’s one of the largest positions for my trust... the bank at 13 and a half times earnings is very cheap,” says Jim Cramer, though he notes some trimming due to recent gains[3]. The stock has outperformed peers, and the options market is heavily skewed toward calls, reflecting bullish expectations.

### Pro Analysis

• Current IV: 48.0% (elevated, but near-term options are cheap)
• IV Rank: 100% (sell premium generally favored, but near-term buying edge)
• Expected Daily Move: ±$2.57 (3.02%)
• Technical: Price above all MAs, RSI neutral, MACD bullish
• Fundamental: Strong earnings, reasonable valuation, 1.94% yield
• Sector: Financials leading, no systemic risk in regionals per Cramer[3]

### Earnings Date Check

• Next Earnings: January 21, 2026 (89 days away)
• Validation: ✅ Nov 21 2025 expiry is before earnings—this is a momentum play, not an earnings play. If you want to capture earnings, use Jan 2026+ expiries.

### Trade Management

• Entry: Place limit order at $0.80 net debit
• Target: Close at $1.20 (50% profit)
• Stop: Exit if WFC closes below 20-day MA ($82.56)
• Time Stop: Close 3–5 days before expiration

### Pricing Validation

• 87.5 Call intrinsic: $0 (OTM), trading at $1.20 ✅
• 90 Call intrinsic: $0 (OTM), trading at $0.40 ✅
• Put-Call Parity: Holds within tolerance ✅
• Spread Pricing: Debit spread, long leg more expensive than short ✅

## Confidence & Risk Assessment

Confidence Level: Moderate-High (7/10)
The trade is supported by cheap near-term volatility, strong technicals, solid fundamentals, and a clear bullish catalyst. However, the Fed decision on October 29 adds event ris