Option Traders Buying JPMorgan Puts Ahead Of November Jobs Report

JPMorgan Chase & Co. JPM is up 35.1% year to date despite several surprise interest rate cuts.

On Monday, JPMorgan had the attention of several large option traders, and the action was more bearish than bullish.

The Trades

Benzinga Pro subscribers received three option alerts related to unusually large trades of JPMorgan options:

• At 9:00 a.m., a trader bought 1,041 JPMorgan put options with a $131 strike price expiring on Friday near the ask price at 68.4 cents. The trade represented a $71,204 bearish bet.
• At 9:12 a.m., a trader sold 548 JPMorgan put options with a $129 strike price expiring on Dec. 20 near the bid price at $1.026. The trade represented an $56,224 bullish bet.
• At 9:23 a.m., a trader bought 1,139 JPMorgan put options with a $130 strike price expiring on Friday near the ask price of 51.9 cents. The trade represented a $59,114 bearish bet.

All together, the three trades represented a net bearish bet of around $74,000.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively small sizes of the JPMorgan trades on Monday morning by institutional standards, they are unlikely to be hedges.

JPMorgan Rally On Pause?

JPMorgan shares have recently traded to new all-time highs, outperforming many of its big bank peers who are still well shy of pre-financial crisis highs. Looking ahead, some of the biggest near-term catalysts for the largest American bank include U.S.-China trade negotiations, Federal Reserve policy and U.S. economic data.

Recent Fed comments suggest the committee will hold off on further rate cuts for the time being, and JPMorgan reported record revenue and $14.4 billion in net interest income in the third quarter, far exceeding analyst expectations. Given JPMorgan won't report fourth-quarter numbers until mid-January, the Friday put buying likely has nothing to do with the big bank’s fundamentals.

Recent trade war headlines have been mostly positive with a December tariff deadline looming on Dec. 15. Still, assuming trade negotiations go down to the wire, the puts purchased on Monday will expire two days prior to the deadline.

Benzinga’s Take

Ruling out Fed actions, fundamental changes and trade war news, the bearish put buyer may be betting on worse-than-expected U.S. economic numbers out this week. The Labor Department will release its November jobs report on Friday morning, just prior to the puts’ expiration on Friday afternoon.

JPMorgan's stock traded around $131.65 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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JPMorgan Chase CEO Jamie Dimon speaks at the Charles H. Wright Museum of African American History in Detroit. Photo by Dustin Blitchok.