For more than five years, the mantra for investing has been, “Don’t fight the Fed.”

Despite weak revenue growth and geopolitical crises, continuous calls for a correction have proven foolish and the market has surged 200% since its 2009 bottom. 

The reason is simple. As the chart below shows, the injection of nearly $3.5 trillion by the Federal Reserve has made all other issues of little importance. You simply cannot pump that much money into the system without putting a huge driver behind asset prices. 

But now the Federal Reserve is talking about increasing rates and has already reduced its bond-buying program to just $15 billion a month from $85 billion last year. The flow of free money into the system could soon reverse and investors are getting anxious. 

If you sell your stocks and wait it out in cash you’ll lose upward of 2% to inflation every year. Holing up in bonds doesn’t look much better with rising rates threatening prices and yields hovering around all-time lows.

Fortunately, the game hasn’t changed, but it may be in a different language. 

Don’t Fight the Fed, European Style

Europe has yet to see the economic rebound we have enjoyed in the United States. The economy is projected to grow just 1.2% this year. The problem is that the euro zone economy is much more dependent on bank lending, whereas a greater proportion of business capital in the United States is provided by the debt and stock markets, and banks have yet to step up lending.

Enter the European Central Bank (ECB). ECB President Mario Draghi already committed to supporting the region by saying the monetary authorities would do “whatever it takes” in a July 2012 speech. By the end of that year, the Vanguard FTSE Europe ETF (NYSE: VGK) had surged almost 20%. While asset prices have continued to gain since, the result on the economy has been less than expected and the ECB is getting impatient.

Earlier this month, it announced it would start buying non-financial assets in October, which means its monetary easing program will begin just as the U.S. central bank’s is ending. Full details of the program are expected at the ECB’s next policy meeting on Oct. 2, and the effect on the markets could look a lot like that of the Fed’s programs on the U.S. markets. 

The ECB has also just begun its program of targeted loans to financial institutions. In June, it announced it would lend up to $544 billion to regional banks at an incredibly low rate of just 0.25% for four years. While the initial tranche of loans on Sept. 18 did not see the demand markets were expecting, the program could still inject a great deal of money into the system.

Banks were a big winner in the ECB’s prior loan program that was announced in late 2011. Private institutions may not have increased lending, but they were still able to take loans from the central bank at just 1% and then buy bonds that would yield upward of 4% over the period. By the end of 2012, the iShares MSCI Europe Financials (NASDAQ: EUFN) had jumped roughly 45%.

I am betting that the new loan program and asset purchases will prove even more profitable for the region’s banks, especially for one in particular. Not only will banks be able to borrow at a rate of near zero, but the ECB will be continuously injecting the economy with money to drive growth. 

#-ad_banner-#Few countries in Europe have had a harder time than Greece since the financial crisis, but things are starting to turn around. Deputy CEO of the National Bank of Greece (NYSE: NBG), Petros Christodoulou, recently told Bloomberg that the country’s banks raised enough capital this year and will not need any extra capital in the upcoming ECB stress tests. Several sectors of the economy, especially tourism, have turned around and credit is improving on a rebounding housing sector.

While there are still risks, the European Union is committed to growth and stability in Greece. The EU and IMF have supported the country through two bailout packages worth hundreds of billions of euros, and the country’s economy is expected to grow 0.5% this year after six years of economic contraction.

NBG Covered Call Strategy

To give us an added degree of safety I want to use a covered call strategy. With NBG trading at $3.03 per share at the time of this writing, we can buy 100 shares and simultaneously sell one NBG Nov 3 Call, which is trading around $0.32 per share ($32 per contract), for a net cost of $2.71 per share. This is well below the 52-week low and gives us nearly 11% downside protection.

If the shares remain above the $3 strike price through expiration on Nov. 22, our position will be sold for that price, earning us a $0.29 per-share profit. This is a 10.7% return over our cost basis in just 60 days. If we were able to make a similar trade every two months, we could earn a 65% rate of return in a year.

I like the trade as long as we can get in for a net cost of $2.75, which still leaves us with a 9% gain if shares are called away. I suggest using limit orders when entering this trade as the spread is wide.

Beyond that point I would start looking at the $3.50 strike, which leaves more upside potential but gives less downside protection. Selling the $3.50 calls means the stock is less likely to be sold and you can sell more calls against the position.

Action To Take –> The road is still likely to be bumpy for Greece, but tremendous monetary support from the ECB should put a bottom under NBG. And we can generate income with a covered call strategy as we wait for shares to reap the benefits of the European Central Bank pumping money into the system.

How do you say, “Don’t fight the Fed” in Greek?

Note: Selling covered calls is like collecting “rental income” on the stocks you own. If you’re not renting out the stocks in your portfolio, you may be missing out on the easiest income around. See how you can collect $1,200 or more each month by clicking here.

This article originally appeared on ProfitableTrading.com: $3 Bank Stock Could Be Your Ticket To 65% A Year