Thursday Options Brief: JPM, SLV & PETM

Includes: JPM, PETM, SLV
by: Interactive Brokers

JPM - JPMorgan Chase & Co. - A New York Times report that said JPMorgan's trading losses could reach $9 billion sent ripples across financial stocks on Thursday morning and pushed shares in the largest bank down as much as 4.1% to $35.26 in the first half of the session. Interest building in the newly issued weekly options contracts on JPM today suggests some strategists are positioning for the price of the underlying to make moves, either to the upside or downside, next week. Out-of-the-money put buying, particularly in the July 06 '12 $32 and $34 strikes, looks for shares in the financial services provider to extend declines. Traders snapping up around 1,200 of the $34 put options for an average premium of $0.26 each profit at expiration next week should shares slip another 4.3% and settle below the breakeven price of $33.74. Low-probability bearish bets are on the rise at the July 06 '12 $32 strike, with more than 500 puts purchased for a premium of $0.08 apiece. The value of these contracts could rise rapidly in the days ahead should JPM's shares continue to come under selling pressure. On the flip side, traders buying far out-of-the-money weekly calls on the stock may see profits if the price of the underlying reverses course. Traders ready to benefit from a rebound in the stock price next week purchased around 850 of the $37 strike call for an average premium of $0.10 each and more than 220 of the $38 strike call for $0.05 apiece. Shares in JPM are hovering around their lows of the session as of midday in New York.

SLV - iShares Silver Trust ETF - Shares in the silver ETF have tanked since last summer, falling more than 40% from a 52-week high of $42.78 in August 2011, down to today's current price and fresh 52-week low of $25.46. A burst of put buying on SLV this morning suggests one or more traders are bracing for the silver slump to continue during the next few months. Upwards of 15,000 puts changed hands at the Sept. $20 strike against open interest of just 832 contracts, with most contracts purchased for an average premium of $0.31 per contract. Buyers of bearish far out-of-the-money put options on the silver ETF profit at expiration in September in the event that shares plunge 23% to $19.69. Shares in the SLV last traded below $20.00 back in September 2010.

PETM - PetSmart, Inc. - Options on the pet superstore operator are more active than usual today as some traders look for shares in PetSmart to hit record highs in the near term. Shares in PETM are up 0.80% this afternoon at $66.03, perhaps on positive analyst comments. Volume in the front month calls is heaviest in the July $70 strike where 1,275 calls changed hands versus open interest of 1,210 contracts. Much of the open interest in the $70 calls appears to have been purchased at the end of May for an average premium of $0.55 each. Today, traders paid an average premium of $0.45 per contract and may profit at expiration next month should the price of the underlying surge 6.7% to top the average breakeven price of $70.45. Shares touched a record high on an intraday basis of $69.97 last Wednesday and are up more than 30.0% year to date.