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Most Active Options Update: JPMorgan Chase & Co (NYSE:JPM)

JPM is seeing notable options trading activity today

by 8/19/2013 2:43 PM
Stocks quoted in this article:

The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Three names of notable interest this afternoon are JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), and Citigroup Inc (NYSE:C).

Financial firms are tumbling today, amid reports that the Securities and Exchange Commission (SEC) is investigating JPM's hiring practices overseas. BAC speculators who are selling to open the weekly 8/23 14.50-strike calls are expecting attempts at a rebound to stall out in this area through week's end. Elsewhere, C option traders who are buying to open the weekly 8/23 50-strike calls are betting on a quick bounce above this round number by Friday's close. Meanwhile, here is a quick look at the interesting activity in JPM's options pits.


The weekend's news that JPMorgan Chase & Co (NYSE:JPM) is being scrutinized by the SEC follows in the footsteps of a string of potential legal woes facing the banking behemoth. Additionally, today's negative price action highlights a recent technical trend for JPM, with the stock off 8.4% from its 12-year high of $56.93, which was tagged on July 24. Neither the investigations nor the downward trajectory have deterred call players from piling on, with the contracts trading at more than two times the average intraday volume. The most active strike by a mile is the September 55 call, which has seen 13,464 contracts trade for a volume-weighted average price (VWAP) of $0.38. (The next most-active strike is the September 50 put, where 7,312 contracts have crossed the tape.) The vast majority of these calls have changed hands on the ask side, and data from the International Securities Exchange (ISE) confirms buy-to-open activity.

By initiating the long calls, the speculators will begin to profit with each step above $55.38 (strike price plus the VWAP) JPM takes through the close on Sept. 20. This breakeven mark represents expected upside of 6.2% to the equity's current perch at $52.16. Should the stock fail to topple the strike price over the next five weeks, the most the traders stand to lose is the initial premium paid. With implied volatility at the September 55 call currently inflated relative to the stock's 20-day historical (realized) volatility (20.3% vs. 11%), premium is relatively expensive at the moment.

Despite JPM's recent downturn, the stock is still sporting a formidable 18.5% year-to-date advance. As such, today's campaign for calls is just more of the same in JPMorgan Chase & Co's (NYSE:JPM) option pits. During the course of the past 10 sessions at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 60,141 calls on JPM, compared to 24,907 puts. What's more, the resultant call/put volume ratio of 2.41 ranks in the 98th percentile of its annual range, indicating long calls have been initiated over puts at a near-annual-high clip throughout the last two weeks.


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