Bulls Expect Strong Yearly Finish for JPMorgan

Schaeffer's Investment Research
  MAY 09, 2013 2:45 PM

Two blocks of 8,000 and 1,000 traded at JPM's December 57.50 call.

 


Today's speculators hold divided expectations for JPMorgan Chase & Co. (NYSE:JPM), despite the stock being down roughly 1%. As of 1 p.m. EDT, about 24,000 calls and 26,000 puts had crossed at slightly slower-than-expected intraday trading rates.

The most active strike has emerged on the bullish side, though, with traders snatching up JPM's December 57.50 call. Of the 10,000 or so contracts exchanged here, 94% went off on the ask side, including two blocks of 8,000 and 1,000. In addition, the option's volume exceeds open interest, and its implied volatility has increased 0.5 percentage points to 18.6%. Collectively, this points to heavy buy-to-open activity.
In order to earn a profit, these call buyers anticipate JPM -- currently docked at $49.30 -- to climb at least 17.6% to finish above the breakeven price of $58.01 (strike price plus the volume-weighted average price of $0.51) prior to the option's expiration date, December 20. If the stock fails to reach the 57.50 strike, the call buyers will only lose the initial premium paid.

Over the past 52 weeks, JPM has risen 21.4%, which may explain why the overwhelming majority of the analysts eyeing this stock endorse it as a "buy" or better. More specifically, 18 rate it as a "strong buy," one as a "buy," three as a "hold," and one as a "sell."

In JPMorgan's options pit, overall, traders have been buying to open puts over calls at an accelerated clip. This is evident through JPM's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day put/call volume ratio of 0.83, which ranks in the 73rd percentile of other such readings during the last 52 weeks.

This article by Milissa Hudepohl was originally published on Schaeffer's Investment Research.

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