Banks Pass Fed Stress Test, Options Bulls Reinvest

Call traders are betting on the sector after the results

Deputy Editor
Jun 29, 2023 at 1:11 PM
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Shares of major bank names are making moves today, after the Federal Reserve said all 23 of the biggest banks in the U.S. included in its annual stress test weathered a severe recession scenario. According to the central bank, the firms maintained minimum capital levels and continued to provide the economy credit. In response, call traders are reinvesting in bank stocks.

Wells Fargo & Co (NYSE:WFC) is faring the best today, last seen up 3.6% at $42.06. Today's pop has helped the shares move back above their year-to-date breakeven level, and extend its quarterly lead to 12.3%.

Options traders are most interested in the weekly 6/30 42-strike call, which expires at the close tomorrow. Roughly 35,000 calls have been exchanged already, which is double the intraday average amount, versus just 17,000 puts. 

Call volume is also running at double the amount typically seen at this point for Bank of America Corp (NYSE:BAC). More than 127,000 bullish bets have crossed the tape, led by the weekly 6/30 29- and 28.50-strike calls, with positions are opening at the former.

At last glance, BAC was seen 2.5% higher at $28.67, though it still maintains a 13.2% year-to-date deficit, as well as a nearly 10% year-over-year loss. Today's pop does have the equity back on track to close above its 60-day moving average, which has acted as pressure for much of 2023.

Lastly, JPMorgan Chase & Co (NYSE:JPM) is trading 3.2% higher at $143.03 at last glance. The security's 30-day moving average is back in place as a layer of support, though a familiar ceiling at the $144 level remains firmly overhead. Year-over-year, JPM is now up 24%.

As far as options activity goes, traders are speculating on both sides of the aisle. So far, 97,000 calls and 36,000 puts have changed hands, which is double the amount typically seen at this point. New positions are opening at the most popular position, the weekly 6/30 143-strike call. 

 

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