JPMorgan Stock Call Options Popular Ahead of Earnings

JPM shares hit a record high of $97.64 last Friday, Oct. 6

Oct 11, 2017 at 11:23 AM
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Third-quarter earnings season kicks off this week, with a number of big-cap financial firms set to take the stage. JPMorgan Chase & Co. (NYSE:JPM) will report quarterly results ahead of tomorrow's open -- and options traders are betting on big things for the bank stock in the wake of earnings.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for starters, speculators have bought to open 59,943 calls and 31,477 puts over the past 10 days. The resultant call/put volume ratio of 1.90 ranks in the elevated 78th annual percentile, meaning this rate of call buying relative to put buying has been faster than usual.

Echoing this skew toward calls is JPM's Schaeffer's put/call open interest ratio (SOIR) of 0.66. Not only does this show that call open interest outweighs put open interest among options set to expire in three months or less, but it ranks lower than 93% of all comparable readings taken in the past year. In other words, short-term speculators are more call-heavy than usual.

Drilling down, the October 104 call has seen the largest rise in open interest over the past two weeks, with 18,657 contracts added -- most of which were bought to open, according to Trade-Alert. By initiating these long calls, traders expect JPM stock to break out above $104 by expiration at next Friday's close. This would mark a record high for the shares, which hit an all-time peak of $97.64 last Friday.

And while JPM has a mixed history in the session after the bank reports earnings, the stock has been a standout on the charts over the long run. Specifically, JPMorgan shares have posted a single-session post-earnings gain in four of the past eight quarters. Over this two-year time frame, the stock has moved, on average, 1.6% in the subsequent session -- regardless of direction with the options market pricing in a bigger swing of 2.7% this time around.

Looking at the charts, any near term pullbacks could be contained in the $95-$96 region, home to the bank stock's rising 20-day moving average, as well as its August and September highs. Today, JPM shares are down 0.5% at $96.64, but remain up 41.2% year-over-year -- thanks in part to the broader "Trump trade."

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