Bullish Stars Align for E*Trade Financial Corporation, Charles Schwab Corp

E*TRADE Financial Corp (ETFC) and Charles Schwab Corp (SCHW) are exploring fresh highs, attracting option bulls

by Andrea Kramer

Published on Mar 6, 2015 at 1:20 PM
Updated on Apr 20, 2015 at 5:32 PM

The bullish stars are aligning for discount brokerage firms E*TRADE Financial Corp (NASDAQ:ETFC) and Charles Schwab Corp (NYSE:SCHW) today. The duo is bucking the broad-market trend lower to assail new heights, and option players are placing bullish bets at a rapid-fire rate.

ETFC was last seen 3.3% higher at $27.85, and earlier notched a near-six-year high of $28.13, as a bigger-than-expected payrolls jump boosts expectations for a rate hike on the horizon -- a boon for discount brokers. In addition, JMP Securities and Deutsche Bank both hiked their price targets by $3 to $31, and reiterated the equivalent of an "outperform" opinion.

Against this backdrop, ETFC calls are crossing at 15 times the average intraday clip, and have outnumbered puts by a margin of more than 12-to-1. According to Trade-Alert, much of that activity consisted of the rolling of now in-the-money April 25 calls to higher strikes in the same series. Bullish betting is just par for the course for E*TRADE Financial Corp (NASDAQ:ETFC) option buyers, though. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 9.33 stands higher than 68% of all other readings from the past year.

SCHW has added 3.5% to flirt with $31.28 -- and earlier scored a 14-year peak of $31.73 -- on the aforementioned rate-hike speculation. In addition, Deutsche Bank said SCHW "remains our top pick to higher rates," and lifted its price target by $1 to $40 while underscoring a "buy" opinion.

In the options arena, SCHW calls are trading at eight times the normal intraday pace, and have outnumbered puts by a margin of 8-to-1. As with ETFC, SCHW option bulls looking to the April series, buying to open the April 26 call -- the most popular option thus far -- to bet on an extended run north of $26 through the next six weeks. More aggressive bulls are initiating long positions at the June 31 and 33 calls, hoping SCHW continues its quest for new highs through June options expiration.

From a sentiment standpoint, today's appetite for Charles Schwab Corp (NYSE:SCHW) calls marks a change of pace. The security's 10-day ISE/CBOE/PHLX put/call volume ratio of 2.30 ranks in the 80th percentile of its annual range, indicating traders have bought to open puts over calls at a faster-than-usual clip during the past two weeks.

Daily Chart of SCHW since January 2015

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