Brokerage Stocks See Hot Options Volume on JPM Trading App News

Both ETFC and SCHW are spiraling today

Karee Venema

Aug 21, 2018 at 11:50 AM

The shares of online brokers are taking a hit today, on news JPMorgan Chase (JPM) will launch a free trading app next week called You Invest. Among the financial stocks trading lower are E*TRADE Financial Corp (NASDAQ:ETFC) and Charles Schwab Corporation (NYSE:SCHW) -- sending options traders into overdrive.

E*TRADE Financial Stock Call Options Pop

E*TRADE Financial shares are down 2.4% at $59.75 -- on track to close below long-term support at their 120-day moving average for the first time since June 2017. Nevertheless, the stock appears to be finding a foothold near the $58-$59 region, which roughly coincides with ETFC's 20% year-to-date return.

etfc stock daily chart aug 21

In the options pits, 6,424 calls and 2,709 puts have traded on ETFC stock so far -- almost four times what's typically seen at this point in the day. It looks like one trader may be initiating a long call spread at the October 65 and 75 strikes for a $0.80 per pair of contracts. If this is the case, the goal is for the equity to rally north of $65 by October options expiration, with the trader lowering their cost of entry -- and limiting their potential reward -- with the short 75 call.

Charles Schwab Stock Targeted for September Short Strangle

Charles Schwab stock is trading 1.5% lower at $50.65, and has now shed almost 16% from its late-May record high of $60.22. The shares are now trading below their year-to-date breakeven level near $51.50, which has recently emerged as resistance.

schw stock daily chart aug 21

SCHW options volume is crossing at six times the expected intraday rate, with 18,207 calls and 12,847 puts on the tape at last check -- in the 100th annual percentile. One speculator appears to be anticipating muted price action in the near term, possibly initiating a short strangle with the September 48.50 put and 50.50 call for a net credit of $1.90 per pair of contracts. If this is the case, the goal is for Charles Schwab stock to finish between the two breakeven points of $46.60 (put strike minus net credit) and $52.40 (call strike plus net credit).

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