IB Options Brief: Intel Corp. (INTC) & JPMorgan Chase & Co. (JPM)

---

Options Feeding Frenzy Ensues Ahead Of Earnings At Intel, JPMorgan  


INTC ñ Intel Corp.
Large-volume bearish positions cropped up in options on the chip giant this morning ahead of the firmís much anticipated fourth-quarter earnings release after the final bell ends trading for the session. Intelís shares are down slightly by 0.30% to stand at $21.24 as of 11:55am in New York.

Investors placing outright bearish bets on the stock ahead of the earnings report utilized 60,000 January contract put options to construct a ratio put spread. Ratio put-spreaders purchased 20,000 of the January $21 strike puts for an average premium of $0.34 per contract, and sold 40,000 puts at the lower January $20 strike at an average premium of $0.10 each. The net cost of the transaction amounts to $0.14 per contract.

The spread positions players to make money if the chip makerís shares fall 1.8% from the current price of $21.24 to breach the effective breakeven point on the downside at $20.86 by expiration day. Maximum potential profits of $0.86 per contract are available should shares in Intel Corp. decline 5.8% to settle at $20.00 at expiration. The sale of twice as many lower strike puts is a sign that traders do not anticipate an all-out collapse in the price of the underlying. The position will start to work against investors in the event that shares in Intel fall 9.9% from the current value to trade below the effective breakeven price of $19.14 before the contracts expire next week.

Bearish sentiment on the stock is also evident at the February $20 strike where around 20,000 puts were purchased for an average premium of $0.31 a-pop. Investors buying the put options make money if INTC shares drop 7.3% to slip beneath the average breakeven price of $19.69 by expiration day in February. Nearly 265,000 option contracts have changed hands on Intel Corp. as of 12:10pm.

 

JPM ñ JPMorgan Chase & Co.
Options traders are initiating bullish stances on the financial services firm today in the final session remaining before JPMorgan is scheduled to reveal earnings for the fourth quarter. Shares in the name are up 0.35% in early afternoon trade to arrive at $44.86 as of 12:15pm. Investors are buying call spreads as well as engaging ratio call spreads to prepare for a rally in the price of the underlying shares.

One options optimist picked up 4,800 calls at the February $45 strike for a premium of $1.45 each, and sold 9,600 calls at the higher February $48 strike at a premium of $0.42 apiece. Net premium required to put on the spread amounts to $0.61 per contract. The investor responsible for the transaction is therefore poised to profit should shares in JPMorgan rally 1.7% to trade above the effective breakeven price of $45.61 ahead of expiration day in February.

Maximum potential profits of $2.39 per contract pad the investorís wallet in the event that the stock gains 7.0% to settle at $48.00 at expiration. Selling twice as many of the upper strike calls significantly reduced the cost of taking a directional stance on JPM, but could work against the trader if shares explode to the upside. Losses on the position start to accumulate should shares in JPMorgan surge 12.3% to exceed the upper breakeven price of $50.39 before the calls expire next month.

Finally, another bullish player paid a net $1.07 in premium to buy a 9,000-lot March $46/$50 call spread. The trader starts to amass profits if shares rally 4.9% to surpass the effective breakeven price of $47.07, and could walk away with maximum potential profits of $2.93 per contract if the stock rises 11.5% in the next couple of months to trade above $50.00 by March expiration. Options investors have traded upwards of 160,000 contracts on the stock thus far in the session, and are exchanging more than 3.8 call options on JPM for each single put being traded as of 12:30pm in New York.



--------------------------------------------------------------------------------

Note: The material presented in this commentary is provided forinformational purposes only and is based upon information that isconsidered to be reliable. However, neither Interactive Brokers LLC norits affiliates warrant its completeness, accuracy or adequacy and itshould not be relied upon as such. Neither IB nor its affiliates areresponsible for any errors or omissions or for results obtained from theuse of this information. Past performance is not necessarily indicativeof future results.

This material is not intended as an offer or solicitation for thepurchase or sale of any security or other financial instrument.Securities or other financial instruments mentioned in this material arenot suitable for all investors. Any opinions expressed herein are givenin good faith, are subject to change without notice, and are onlycorrect as of the stated date of their issue. The information containedherein does not constitute advice on the tax consequences of making anyparticular investment decision. This material does not take into accountyour particular investment objectives, financial situations or needsand is not intended as a recommendation to you of any particularsecurities, financial instruments or strategies. Before investing, youshould consider whether it is suitable for your particular circumstancesand, as necessary, seek professional advice.

---

View Andrew Wilkinson's post archive >