2 Bank Stocks Hit With Pre-Fed Bear Notes

Put traders have targeted BAC and JPM recently

by Karee Venema

Published on Sep 6, 2019 at 10:30 AM

Bank stocks will be in focus over the next two weeks, with the Fed's two-day policy meeting set to begin on Tuesday, Sept. 17. KBW is weighing in on the sector ahead of the event, issuing bear notes overnight for big banks Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM).

Five weeks after upgrading BAC stock to "outperform," the brokerage firm downgraded it to "market perform," and cut its price target to $29 from $36 -- roughly in line with last night's close at $28.12. In reaction, the bank shares are down 0.8% at $27.90, retreating after yesterday's rally was stopped short at their 200-day moving average. Year-to-date, Bank of America is up 13%.

This growing skepticism has been seen in the options pits, too. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BAC's 10-day put/call volume ratio of 0.47 registers in the 87th annual percentile, meaning puts have been bought to open relative to calls at a quicker-than-usual clip. Today, speculators may be purchasing new positions at the weekly 9/6 28-strike put, betting on more downside for BAC stock through expiration at tonight's close.

JPMorgan Chase stock saw its price target lowered to $121 from $134 at KBW. Nevertheless, the security is up 0.1% at $112.49, trading comfortably above the psychologically significant 200-day trendline, as well as its 40-day moving average, which was toppled during Thursday's 2.3% pop.

Put buying has been popular in JPM's options pits, too, per the stock's 10-day put/call volume ratio of 1.09 -- in the 85th percentile of its 12-month range. Likewise, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.05 registers in the 71st annual percentile, meaning short-term traders are more put-heavy than usual toward the bank stock. This could create tailwinds for JPMorgan Chase in the near term, as the hedges related to these bets begin to unwind.


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