Buying A Call Option On JPMorgan Chase $JPM

| April 15, 2015 | 0 Comments

Financial InstitutionBuying A Call Option On JPMorgan Chase $JPM

The financial sector has been one of the more challenging sectors to invest in since the financial crisis of 2008/2009.  The sector itself (especially banks) got hit the hardest during the crash.  And, it’s been one of the slowest to recover from the damage.

Additional regulations have made it much harder for banks (and other financial institutions) to take large risks.  And, quite a bit more banking reserves are required these days in order to help avoid the bailouts we saw during the crisis.

So where’s that leave a company like JPMorgan Chase $JPM?

JPM is the largest bank in the US.  Essentially, the banking giant is a combination of the massive retail bank Chase, and the powerhouse investment bank, JP Morgan.  The combined entity generates over $50 billion a year in revenues.

Despite a strong brand and solid fundamentals, the stock hasn’t performed all that spectacularly this year.  Before this week, the share price was basically flat for 2015.

Currently, $JPM is trading at $63.28.  That’s 23% from the 52-week low, and 1% higher than the previous 52-week high.

So is now the time to buy a call option on $JPM?

As a reminder, a call option makes money when the underlying stock goes up.  Is $JPM headed to even higher highs?

For a more in-depth look at JPM, you can check here.

Here’s the deal…

$JPM may finally be in the good graces of investors after announcing better than expected earnings.

Earnings climbed 12% from the same quarter last year, reaching $1.45 per share.  Wall Street expectations were for $1.40 per share.  Meanwhile, revenues came in at $24.8 billion for the quarter, better than the $24.5 billion expected.

It’s certainly good news for a company to beat on both the top and bottom line.  However, it’s especially important for a bank these days, as investors aren’t sure how new regulations will impact business.

Moreover, the company’s earnings beat was mostly due to an increase in trading revenues.  It’s the first increase since the financial crisis and yet again, another good sign for shareholders.

Here’s the chart of $JPM:

call option buying opportunity, a chart of $JPM

As you can see above, the stock has taken a sharp turn higher on the good earnings news. After hovering above the 50-day moving average, the shares have broken out to the upside this week.

Now could be a great time to buy a $JPM call option

Given the strong earnings, $JPM may be in store for a bullish next few months.  The financial sector has been weighed down recently, so this may present an excellent buying opportunity before the crowd decides to move in.

As such, buying a medium-term call is in order.  The September 65 calls are trading around $2.  That’s a reasonable price to pay for about a 5% move (to profitability) and 5 months to go until expiration.

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.

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