While JPM is outperforming the implied move in the options market today following it’s Q4 earnings report, the stock is still trading above last Friday’s close, which in a lot of ways is fairly impressive considering the stock had run 10% in 8 trading days into the print. As I often say, it appears that the “Fix IS IN” for the bank stocks. The price action is obviously making it tough to remain short into BAC, GS, C and MS’s earnings next week. Most of the sector is doing a pretty good job shrugging off JPM’s revenue miss, and the path of least resistance may continue to be up.
Additionally, on a day that has been filled with rumors of S&P downgrades for European nations, the banks appear to take this in stride. Trust me I am not a fan of these stocks as investments until we get the next scare and decline, but if the market is going to shrug off S&P downgrades and bank earnings aren’t as bad as people expect, we could see a continuation of the sector rally next week.
I am not looking to Play GS for it’s Q4 report next week on Jan18th. The options market is implying about a 5% move which is rich to its 4 qtr average move of about 3%. GS has under-performed (only up 9% ytd) BAC this yr up 19% and C up 17% ytd. It could definitely play some catch up on a “not as bad as we thought” report and commentary, which could set the stage for a broader more sustained rally.
The chart sets up for a monster move back to the post Thanksgiving November Highs and its 200 day moving average on the slight bit of good news.
NEW TRADE:
GS $98.60 Bought Feb 110 call for 1.15
Break-Even on Feb Expiration: 111.15 or higher profit, btwn 111.15 and 110 lose up to 1.10 and below 110 lose all 1.15
I DON’T THINK YOU HAVE TO CHASE THESE HERE, ESPECIALLY IN FRONT OF A THREE DAY WEEKEND AND THE RUMORED S&P DOWNGRADE OF SOME EUROPEAN COUNTRIES. THERE IS A GOOD CHANCE THAT IF THE MARKET AND GS AREN’T LOWER TUESDAY MORN THAT THE (edit: PREMIUM) IN OPTIONS WILL BE CHEAPER. (edit: due to decay and lower volatility)