A 7-Figure Options Bet on JPMorgan Chase & Co. (JPM)

One options trader may be betting on a speedbump ahead for JPMorgan Chase & Co. (JPM)

Nov 11, 2016 at 3:29 PM
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Like many other big names in the financial sector, banking stock and Dow component JPMorgan Chase & Co. (NYSE:JPM) has been barreling higher on the charts following Tuesday's surprise election result. It's generally expected that regulations on banks will ease under a Donald Trump presidency, with the future of the Dodd-Frank Act in question. JPM in particular is in focus, following rumors CEO Jamie Dimon could be tapped for the role of treasury secretary. Though the shares are taking a breather today, last seen off 0.4% at $76.38, the stock's options pits are still seeing unusually heavy activity.

JPM calls are crossing the tape at roughly 1.7 times the typical intraday rate, far outpacing put volume in the process. Driving much of the action is the December 80 call -- the most active strike by a mile -- where it appears a block of 25,702 contracts may have been sold to open for $0.62 each. If this is the case, the call writer collected a total premium of nearly $1.6 million (premium paid * number of contracts * 100 shares per contract). The goal is for the $80 level to serve as a ceiling for JPM shares through the back-month expiration, on Friday, Dec. 16.

Looking back, bearish JPM options traders have generally taken a more traditional approach. Over the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have purchased 1.59 puts for each call. The resulting put/call volume ratio ranks just 3 percentage points from an annual high. Likewise, JPM has a Schaeffer's put/call open interest ratio (SOIR) of 1.03 -- higher than 96% of the past year's readings.

It's possible some recent put buyers have actually been JPM shareholders looking for a hedge against a downside surprise. However, bearish sentiment has been creeping up elsewhere, as well. For instance, short interest on the stock -- while accounting for less than 1% of JPM's total float -- climbed by roughly 13% over the two most recent reporting periods.

Analysts haven't had high expectations for JPM, either. More than half of the brokerage firms providing coverage rate the shares a "hold" or "strong sell." Plus, the average 12-month price target of $73.11 now sits underfoot -- suggesting upgrades and/or price-target hikes may be overdue.

From a technical standpoint, JPMorgan Chase & Co. (NYSE:JPM) has given investors little to complain about lately. The stock is up 45.5%, from its February low of $52.50, adding nearly 13% this week alone. Plus, after a bounce from support at the 10-week moving average, JPM tapped a fresh all-time high of $77.25 just yesterday. As it stands, it seems the stock is likely to buck its historically downbeat November trend.

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