Earnings Preview: JPMorgan Chase & Co. (JPM)

JPMorgan Chase & Co. (NYSE:JPM) will report first-quarter earnings tomorrow morning

by Karee Venema

Published on Apr 12, 2016 at 1:09 PM
Updated on Apr 12, 2016 at 1:09 PM

Earnings season is underway, after aluminum firm Alcoa Inc (NYSE:AA) unveiled its first-quarter results to little fanfare. Financial firms will get the ball rolling over the next several sessions, with big bank JPMorgan Chase & Co. (NYSE:JPM) slated to report earnings tomorrow morning -- and fellow Dow component Goldman Sachs Group Inc (NYSE:GS) on tap next week. Options traders have been growing restless on JPM stock ahead of the scheduled event, with put buying picking up steam in recent weeks.

Specifically, JPM's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.98 ranks in the 70th annual percentile. In other words, puts have been bought to open relative to calls at a faster-than-usual clip.

In the front-month series -- which expires at this Friday's close -- peak put open interest is found at the underfoot April 57.50 strike (11,592 contracts, to be specific). As such, this level could serve as options-related support for JPM through week's end.

Meanwhile, despite the uncertainty surrounding JPM's earnings event, options traders can still buy premium on the stock's near-term options at a relative bargain. In fact, JPM's Schaeffer's Volatility Index (SVI) of 24% sits lower than 73% of all comparable readings taken in the past year, meaning short-term volatility expectations are low, historically speaking.

Looking back over the past eight quarters, JPM has averaged a single-session post-earnings move of 2.2% -- with four quarters enjoying a positive earnings reaction and four succumbing to a negative earnings reaction. This time around, the options market is pricing in a bigger 4.3% swing.

Technically, JPMorgan Chase & Co. (NYSE:JPM) has struggled over the long term, down 16.4% from its late-July all-time high of $70.61. Today, although the stock is enjoying broad-market tailwinds -- up 1.5% at $59.05 -- it is running out of steam near its 40-day moving average, a trendline that has worked against JPM for most of the year.

JPM daily chart

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