Schaeffer's Trading Floor Blog

Bearish Options Betting Picks Up On Struggling JPMorgan Chase & Co. (JPM)

JPM is in the news today, at home and abroad

by 5/20/2014 2:50 PM
Stocks quoted in this article:

JPMorgan Chase & Co. (NYSE:JPM) has made multiple headlines today, but the news has had a minimal effect on the shares. At last check, the financial stock was off just 0.4% to trade at $53.60. Meanwhile, JPM's options traders have grown increasingly bearish in the last couple of months.

For example, the equity's 50-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) registers at 0.62, compared to 0.41 on March 20. What's more, the current ratio is higher than 70% of comparable readings from the past year, confirming the stronger-than-usual bias toward long puts, relative to calls, of late.

In a similar vein, JPM's Schaeffer's put/call open interest ratio (SOIR) of 1.15 indicates put open interest outweighs call open interest among options with a shelf-life of three months or less. Relative to the previous 12 months' worth of data, the current SOIR sits just 5 percentage points from an annual peak. In other words, short-term option traders have rarely been as drawn to JPM puts (relative to calls) as they are at present. Now is a good time to wager on the security using front-month options, too; JPM's Schaeffer's Volatility Index (SVI) of 15% rests just 4 percentage points from a 52-week low.

On the flip side, analysts are bullish on JPMorgan Chase. In fact, three-quarters of the stock's 20 covering analysts give the shares a "buy" or better rating. If that's not enough, the equity's consensus 12-month price target of $64.20 represents a nearly 20% premium to the stock's current price.

Based on its lackluster technical track record, however, JPM could be on the verge of downgrades and/or price-target cuts. Specifically, the banking stock is off more than 8% in 2014, and since hitting a decade-plus high of $61.48 in late March, has shed close to 13% of its value. In fact, JPM is at risk of finishing May below its 10-month moving average, which hasn't occurred since August 2012.

As alluded to earlier, JPMorgan Chase & Co. (NYSE:JPM) is making headlines today -- for both good and bad reasons. On the one hand, the financial company promised to invest $100 million to help redevelop Detroit over the next five years; on the other, the European Commission charged JPM and several of its sector peers with attempting to rig financial benchmarks related to the euro.

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