Unusual Options Activity In JP Morgan $JPM

| November 18, 2015 | 0 Comments

Financial InstitutionUnusual Options Activity In JP Morgan $JPM

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week…

JP Morgan $JPM is a massive financial company focused on retail and institutional banking.  The company does over $50 billion in sales per year and earns $22 billion in profits.  For a good description of the company, follow the link.

$JPM is trading at $66.01, up 9% for the year.  That’s 6% below the 52-week high and 33% above the 52-week low.

So what does unusual options activity in JPM tell us?

JPM has had a better year than most banks, despite it being a relatively tough environment for financials for most of the year.  The stock didn’t get hit nearly as hard as its competitors did during the August correction.

The share price has generally climbed over the last several weeks after it became clear the Fed wanted to hike interest rates this year.  Keep in mind, higher rates are a good thing for banks at the current level.

Here’s the deal…

This week, a large amount of puts traded in JPM options.  Keep in mind, a put option makes money when the underlying stock goes down before its expiration date.  Conversely, selling a put option is beneficial when a stock goes higher or stays neutral.

To be more specific, a trader sold over 4,700 63.50 puts expiring on December 24th.  These puts were sold for $0.79, resulting in total collected premium of close to $370,000.  The volume far exceeds the open interest, so this is definitely opening action.

Here’s the chart of $JPM:

unusual option activity, a chart of JPM

As you can see, JPM didn’t experience the massive selloff many other banks were hit with in August.  It has since recovered all the lost ground and is flirting with highs for the year.  The share price is also trading well above the 50-day moving average.

As a matter of fact, the puts sold in today’s block are almost right at the 50-day moving average.  That suggests it will provide strong support over the next several weeks, should a pullback occur.

What’s more, despite the stock posting 9% gains for the year, it is still trading at a very reasonable valuation.  The current share price is just 11x earnings.  The put seller obviously feels JPM has limited downside given the fundamentals (and technicals).

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

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: Unusual Options Trading Activity

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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