Trump Chaos Sparks Heavy Options Trading on BAC, JPM, and C

Bank of America shares are at risk of closing below their 120-day moving average for the first time since July

May 17, 2017 at 3:36 PM
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Stocks are selling off today, as growing political drama out of D.C. casts a shadow on the Trump administration's ability to get its economic agenda through Congress. And while gold stocks are benefiting from this risk-off backdrop, financial shares are struggling -- after being one of the standout sectors during the so-called "Trump trade." Among notable bank stocks, Bank of America Corp (NYSE:BAC)Citigroup Inc (NYSE:C), and JPMorgan Chase & Co. (NYSE:JPM) are all trading in negative territory -- and options volume is on the rise.

BAC Options Traders Eye a Quick Bounce

BAC stock was last seen down 6.2% at $22.50 -- on track to close south of its 120-day moving average for the first time since July 13. Nearly 491,500 calls and 260,717 puts have changed hands on Bank of America, or almost three times what's typically seen at this point in the day.

Most active is the stock's September 24 call, due to a 60,056-contract block that was apparently sold to open earlier and is tied to stock. Short-term BAC options traders seem to be purchasing new positions at the May 23 call, where 25,278 contracts have crossed, betting on a quick bounce by Friday's close, when front-month options expire.

C Options Traders Target the Round $60 Level

Citigroup shares have shed 4.3% to trade at $59.78, at risk of settling below $60 since early May. At last glance, 83,516 calls and 75,914 puts have traded on C stock -- more than double the average daily volume. The 60 strike is popular on both sides of the aisle, and it looks like new positions are being purchased.

Call buyers expect Citigroup stock to reclaim its footing atop the strike over the next two days, while put buyers are anticipating a steeper slide. Regardless, the most either set of options buyers stands to lose is the initial premium paid.

JPM Stock Finds Support

JPMorgan Chase shares are trading down 3.9% at $84.22, but appear to have found a foothold in the $84 region -- home to a 23.6% Fibonacci retracement of JPM's post-election rally. Longer term, the security is maintaining a roughly 37% year-over-year lead. In JPM's options pits, volume is running at around two times the expected intraday pace, with 85,897 puts and 61,589 calls traded.

On the bear side, it looks as if one trader may be selling to close his May 86 puts and rolling them down to the 84 strike -- possibly anticipating additional losses through week's end. Option bulls, meanwhile, could be initiating new long positions at JPM stock's June 87.50 and weekly 6/23 87-strike calls, eyeing a bounce from the bank shares over the next several weeks.

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