Megabank JPMorgan Chase & Co (JPM) has been moving higher since the recent fears in the banking sector. One trader is betting that trend will continue.
That’s based on the November $175 calls. With 211 days until expiration, 4,870 contracts traded compared to a prior open interest of 109, for a 45-fold rise in volume on the trade. The buyer of the calls paid $1.06 to make the bullish bet.
Shares last traded just over $140, so they would need to rise about $35, or about 23 percent, for the option to move in-the-money. JPMorgan shares are already close to their 52-week high of $144.34, so this would represent a big move higher.
Given that the bank’s deposits have swelled amid a crisis with smaller banks, a move higher is possible. But while the most recent crisis helped JPMorgan in terms of deposits, it led to a drop in the share price.
Action to take: As a mega-bank in the “too big to fail” category, and with double-digit earnings and revenue growth before the banking crisis, shares are likely to trend higher. Investors can get shares at about 10 times forward earnings and a 2.8 percent dividend yield here.
For traders, the November calls are aggressive in terms of moving in-the-money. But they’re also low-priced. That could lead to mid-to-high double-digit returns in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.