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JPMorgan Chase & Co. (JPM) Calls Pop as Rate-Hike Chatter Swirls

JPMorgan Chase & Co. (NYSE:JPM) is one of many bank stocks rallying today

May 18, 2016 at 2:53 PM
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JPMorgan Chase & Co. (NYSE:JPM) is outperforming today, as bank stocks surge on growing rate-hike speculation -- a theory echoed by CNBC's Jim Cramer and the latest Fed minutes. Additionally, the big-cap bank unveiled a quarterly-dividend hike at yesterday's annual shareholders meeting, and was cleared of its alleged role in Bernie Madoff's Ponzi Scheme. At last check, JPM stock was up 3.6% at $63.90, and call volume was running at two times the average intraday pace.

Seeing the most action in JPM's options pits so far are the weekly 6/10 63.50-strike and June 65 calls, where a collective 8,794 contracts have traded. It looks as if new positions are being purchased at both strikes, as options traders roll the dice on an extended rally through the respective expiration dates.

Today's accelerated call activity is nothing new in JPM's options arena. At 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 1.75 rests higher than 88% of all comparable readings taken in the past year.

Echoing this call-skewed backdrop is JPM's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.65, which shows that near-the-money call open interest nearly doubles put open interest among options expiring three months or less. In fact, the May 62.50 call holds the most open interest of all JPM options, with 34,146 contracts outstanding. Next up is the June 65 call, where 33,176 contracts are housed.

Now appears to be a prime time to purchase the stock's near-term options, too, as JPM's Schaeffer's Volatility Index (SVI) of 20% rest lower than 82% of all comparable readings taken in the past year. Simply stated, premium on the equity's short-term options is pricing in relatively low volatility expectations at the moment.

Technically, JPM has been bouncing higher along a trendline connecting a series of higher lows since mid-February. This -- along with JPMorgan Chase & Co.'s (NYSE:JPM) 40-day moving average -- could help support the shares as the "live" June Fed meeting nears.

JPM daily chart

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