JPMorgan Chase & Co. (JPM) Puts Hot, Despite Investor Day Pop

Shares of JPMorgan Chase & Co. (JPM) are higher, as the firm hosts its annual investor day

Feb 24, 2015 at 11:05 AM
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JPMorgan Chase & Co. (NYSE:JPM) is up 2.5% this morning at $60.85, after the financial firm unveiled a $1.4 billion cost-cutting plan at its annual investor day. Additionally, the company said it will start charging big institutional clients on certain deposits, due to new regulations. In the options pits, overall volume has jumped to 1.8 times what's typically seen at this point in the day, with a number of traders gambling on JPM to surrender today's gains -- and then some -- over the next four weeks.

Drilling down, the equity's most active put is the March 58.50 strike, where it appears new positions are being purchased. By initiating these long puts, speculators expect JPM to settle south of $58.50 -- which roughly coincides with the equity's 40-day moving average -- at the close on Friday, March 20, when front-month options expire. Amid today's pop, delta on the put has moved to negative 0.20 from negative 0.38 at last night's close, indicating a slimmer chance of an in-the-money finish.

Widening the sentiment scope reveals calls have been preferred on JPM in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day call/put volume ratio of 2.02 ranks in the 77th annual percentile. Simply stated, calls have been bought to open over puts at a faster-than-usual clip.

Echoing this call-skewed trend is JPM's Schaeffer's put/call open interest ratio (SOIR) of 0.57. Not only does this show that call open interest nearly doubles put open interest among options slated to expire in three months or less, but it rests lower than 87% of similar readings taken in the past year. In other words, short-term speculators are more call-heavy than usual toward JPM.

Regardless of whether JPMorgan Chase & Co. (NYSE:JPM) options traders are buying to open calls or puts, they can rest easy knowing they're placing these bets at a relative bargain. The security's Schaeffer's Volatility Index (SVI) of 20% sits in the 38th percentile of its annual range, meaning premium on the equity's front-month options is currently pricing in low volatility expectations.


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