Options Activity Alert: JPM, JNY, MW

JPM – JPMorgan Chase & Co. – Financial stocks are on a tear today after the ECB released details of its bond-buying plan amid a better-than-expected ADP report that showed private-sector employers added 201,000 jobs in August. Shares in JPMorgan earlier rallied to their highest level on an intraday basis since May 10th, climbing 4.7% to touch $38.87 in the first half of the session. Options traders positioning for shares in the name to extend gains in the near term pounced on the newly issued weekly contracts expiring one week from tomorrow. Call volume is on the rise at the Sep. 14 ’12 $38.5, $39 and $39.5 strikes. Roughly 1,400 calls changed hands at the $38.5 strike by midday, with much of the volume purchased for an average premium of $0.56 apiece. Traders long these in-the-money call options stand ready to profit next week should JPM’s shares exceed the average breakeven price of $39.06. Trading traffic spread to the Sep. 14 ’12 $39 strike where more than 3,100 contracts are in play. Overall options volume of 166,735 contracts as of 12:40 p.m. ET on JPMorgan is well above the stock’s average daily options volume of around 70,500 contracts. Calls are more active than puts, with the call-to-put ratio hovering around 1.6.

JNY – The Jones Group, Inc. – Apparel and accessories retailer, The Jones Group, Inc., is seeing heavier than usual options activity today, with shares in the name rallying 3.5% to an intraday- and new 52-week high of $13.38 in the first half of the trading day. The company was scheduled to present at the Goldman Sachs 2012 Global Retailing Conference ahead of the opening bell this morning. One options trader appears to be positioning for shares in the name to potentially rise to their highest level since April 2011 by October expiration. It looks like the strategist purchased a 657-lot Oct. $12/$15 call spread for a net premium outlay of $1.40 per contract. The position makes money as long as shares in Jones exceed the effective breakeven price of $13.40 by expiration, with maximum potential profits of $1.60 apiece available on the spread as long as shares tack on another 12% to top $15.00 in the next six weeks. The October calls are set to expire one week before JNY’s third-quarter earnings report on October 24th.

MW – Men’s Wearhouse, Inc. – A pre-earnings bullish bet initiated on retailer, Men’s Wearhouse, Inc., all but assured one options strategist they’d like the way their position looked less than 24 hours later, as long as shares moved sharply to the upside following the second-quarter report on Wednesday. After the closing bell yesterday, the specialty retailer posted better-than-expected net income in the second quarter driving shares in the name higher in after-hours trading. Today, the stock increased as much as 16.1% to $36.98, and currently trades 14.5% higher on the session at $36.46 as of 1:05 p.m. in New York. The trader that purchased the 600-lot Sep. $32/$35 call spread for a premium of $1.20 apiece yesterday accurately predicted the direction of the shares, but missed a bit on the magnitude of the move. Though not quite bullish enough, the strategy is a big win for the trader, who may make as much as $1.80 per contract if the position is held through expiration in two weeks and the shares settle above $35.00. Alternatively, the trader may decide to unravel the position and take substantial gains off the table ahead of September expiration.

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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