JPM – JPMorgan Chase & Co. – Three-legged bullish options combinations enacted on JPMorgan Chase & Co. at the start of the trading session indicates investors are expecting the price of the underlying shares to rally significantly by November expiration. Shares started to rally late last week on news the bank may increase its dividend next year and rise as much as 45% in the next two years on acquisitions made during a down economy and on the strength of its senior management team, according to analysts cited in Barron’s. JPMorgan’s shares are currently up 0.80% at $39.07 as of 11:30 am ET, but earlier increased as much as 2.00% to touch an intraday high of $39.54. Bullish players purchased approximately 11,000 now in-the-money calls at the November $39 strike for an average premium of $1.91 each, sold roughly 11,000 calls at the higher November $43 strike at an average premium of $0.42 apiece, and shed some 11,000 puts at the November $37 strike for an average premium of $0.85 a-pop. Average net premium paid to establish the spread amounts to $0.64 per contract. Thus, traders employing this strategy are poised to profit should JPM’s shares rally above the average breakeven price of $39.64 by expiration day in November. Maximum potential profits of $3.36 per contract are available should the bank’s shares surge 10.05% over the current price of $39.07 to exceed $43.00 by November expiration.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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