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Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are JPMorgan Chase & Co. (NYSE:JPM - 48.98), Netflix, Inc. (NASDAQ:NFLX - 183.75), and Bank of America Corp (NYSE:BAC - 11.30). Here is a quick look at today's interesting activity in these options pits.
Bernstein upped its price target on JPM this morning to $54 from $52, after the banking concern announced some cost-cutting measures Tuesday. The stock has trekked nearly 3% higher as a result, and one group of optimistic option players is eyeing additional upside by scooping up the stock's weekly 3/1 50-strike calls. The majority of the nearly 12,500 contracts traded here have crossed at the ask price, and only 1,549 positions currently make up open interest, hinting at buy-to-open activity. By purchasing these out-of-the-money calls for a volume-weighted average price (VWAP) of $0.08, traders will begin to profit with each step above $50.08 (strike price plus VWAP) JPM takes through Friday's close, when the short-term contracts expire. The options market is fairly skeptical these calls will finish in the money by week's end, as delta is currently perched at 0.17, or 17%, suggesting a less than 1-in-5 chance the positions will expire north of the strike price.
Weekly options are a popular pick on NFLX today, too. The stock's 3/1 190-strike call has garnered the most attention thus far, as around 5,100 contracts have changed hands. These positions are going off at both the bid and the ask price, and volume is outstripping open interest, suggesting today's action is a mix of both selling and buying. By writing the calls to open, traders expect NFLX to finish the week south of the $190 mark, allowing them to keep the maximum reward of $1.25, which Trade-Alert indicated was the VWAP. Meanwhile, the profit potential for the call buyers is theoretically unlimited with each step above breakeven at $191.25 (strike plus VWAP) NFLX takes through Friday's close.
One trader in BAC's options pits is giving a longer-term outlook today. Shortly after 11:00 a.m. ET on the International Securities Exchange (ISE), one block of 5,000 November 11 puts crossed the tape at the bid price for $1.09. Volume outstrips open interest here, making it safe to assume that these positions were sold to open. By initiating the short puts, the speculator is assuming BAC will maintain its foothold above $11 through November, allowing him to pocket the full potential profit on the play, which is equivalent to the net credit collected. However, losses can be quite substantial should the stock stumble, with the put seller on the hook to deliver the stock at $11 per share, regardless of how far BAC could fall by November expiration.
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.