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Options Intelligence Report: JPMorgan Chase & Co. (JPM) & PepsiCo, Inc. (PEP)

JPM – JPMorgan Chase & Co.
The banking institution’s shares surrendered intraday gains of about 1% over yesterday’s close and are currently trading flat at $41.62 with roughly eighty minutes remaining in the session. A bull call spread established in the June contract indicates one investor is hoping for a sharp rally in the price of the underlying stock by expiration in four months time.

The trader purchased 15,000 calls at the June $45 strike for an average premium of $1.32 per contract, and simultaneously shed the same number of calls at the higher June $50 strike for $0.31 apiece. The net cost of the bullish transaction amounts to $1.01 per contract. Therefore, the investor is positioned to amass maximum potential profits of $3.99 per contract for total gains of $5.985 million if JPM’s shares surge 20% from the current price to $50.00 by June expiration. JPMorgan’s shares must increase at least 10.55% to $46.01 before the trader breaks even on the transaction.

 


PEP – PepsiCo, Inc.
Beverage and snack manufacturer, PepsiCo, ushered in bullish options traders today perhaps after analysts at Goldman Sachs Group resumed their ‘buy’ rating on the stock with a target share price of $75.00. Pepsi’s shares increased 0.55% during the session to $64.15, which is a scant $0.33 less than its current 52-week high of $64.48 attained back on December 7, 2009.

Near-term optimistic traders quenched their thirst for call options by purchasing 5,100 contracts at the March $65 strike for an average premium of $0.50 apiece. Call-buyers profit if Pepsi’s shares rally another 2.10% to surpass the breakeven price of $65.50 by expiration day.

Longer-term bullish sentiment appeared in the October contract where one investor initiated a risk reversal by selling put options to finance the purchase of calls. The trader sold approximately 1,100 puts at the October $60 strike for a premium of $2.55 apiece in order to buy roughly the same number of calls at the higher October $67.5 strike for $2.00 each. The investor pockets a net credit of $0.55 per contract on the reversal play, and keeps the full credit if PEP’s shares trade above $60.00 through expiration day in October. Additional profits accumulate should shares of the underlying stock rally 5.20% to trade above $67.50 in the next eight months to expiration.

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