Option Activity Alert: JPM, GS, VLO, HRB

JPM – JPMorgan Chase & Co. – Financial names are on a tear today, and some options strategists are positioning for the good times to continue in the near term. Weekly call options on some of the large-cap financials are flying off the shelves this afternoon, as traders look to take advantage of the rally while it lasts. Shares in JPMorgan are soaring 8.2% to stand at $32.96, making the stock the best performer of the 15-largest holdings in the XLF, as of 12:30 PM in New York. Investors prepared to benefit from continued gains in the price of the underlying purchased in- and out-of-the-money call options with one week remaining to expiration. Bulls picked up roughly 1,800 in-the-money calls at the Dec. ’09 $32 strike for an average premium of $1.06 each, and bought another 3,000 calls at the higher $33 strike at an average premium of $0.39 apiece. Call buyers may profit at expiration next week in the event that shares in JPMorgan Chase & Co. exceed the average breakeven prices of $33.06 and $33.39, respectively.

GS – Goldman Sachs Group, Inc. – Similar to that observed on JPM, near-term bullish activity in Goldman’s weekly calls indicates traders are willing to shell out premium today to speculate on continued recovery in the price of the financial institution’s shares over the next five trading sessions. Goldman’s shares are up 5.6% at $99.75 in early-afternoon trade. Options players exchanged more than 5,900 calls at the Dec. ’09 $105 strike against open interest of 187 contracts, and appear to have purchased the majority of the contracts for an average premium of $1.05 a-pop. Investors long the call options may profit at expiration next week in the event that shares in Goldman Sachs surge 6.3% to surpass the average breakeven point on the upside at $106.05. Finally, bullish sentiment spread to the higher $110 weekly call where traders paid an average premium of $0.30 to buy some 630 contracts.

VLO – Valero Corp. – Financial stocks are not the only bright spots in the market today, as evidenced by the 5.0% rally in shares of oil refiner Valero Corp. to $23.22. Options traders hoping the stock will record many more green sessions during the next couple of months picked up January 2012 contract call options this morning. It appears traders purchased around 2,500 calls at the Jan. 2012 $24 strike for an average premium of $1.08 each, and paid out an average premium of $0.58 per contract to buy some 2,300 call options up at the Jan. 2012 $26 strike. Traders poised to benefit from continued bullish movement in the price of Valero’s shares may profit on the weekly options positions should the stock climb 8.0% and 14.5% to top the average breakeven points at $25.08 and $26.58 at expiration, respectively. Shares in Valero last traded above $26.58 back on October 28.

HRB – H&R Block, Inc. – The provider of income tax preparation and other business and consulting services popped up on our scanners this morning after large prints in December contract calls changed hands. Call activity appears to have been initiated by one or more optimistic investors positioning for shares in H&R Block to rebound from today’s steep 10.0% decline to $14.45. The stock dropped after the company posted a wider-than-expected loss for the second quarter, after the close of trading on Thursday. Investors anticipating a quick turn-around in the price of HRB shares traded upwards of 8,900 calls at the Dec. $15 strike against open interest of 1,004 contracts. It appears the vast majority of the contracts were purchased for an average premium of $0.46 a-pop. Buyers of the calls stand prepared to profit at December expiration should H&R Block’s shares rally 3.3% over the current price of $14.96.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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