JP Morgan Chase and Goldman Sachs stock options involve larger-than-usual post-earnings moves

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Options traders appear to be expecting a good start to the first-quarter earnings season, as shares of JP Morgan Chase & Co. and Goldman Sachs Group Inc. are priced for much larger moves than usual after they the results are published. . Meanwhile, stock option prices are implying a post-earnings move in Wells Fargo & Co. stock that is in line with recent history.

JP Morgan Chase JPM, -0.96%, Goldman Sachs GS, -1.26% and Wells Fargo WFC, -2.42% are scheduled to report first quarter results before the opening bell on Wednesday. To measure how much a stock is expected to move the day after earnings are reported, Wall Street traders can use an options strategy known as a “straddle,” which involves the simultaneous pricing of call and bear options. (put) with strike prices at the same “in the money” share price, or current, for expiration at the end of the week. Read more about forks. Straddles are games of pure volatility, as they are not directional. Straddle buyers make money if a stock moves in any direction more than the option price implies; otherwise the straddle expires with no value. JP Morgan Chase stock is priced at $ 4.07 on Wednesday in either direction, or 44% higher than the average one-day move of $ 2.82 after the last 12 quarterly reports, according to data provided by Option Research & Technology. Services (ORATS). director Matt Amberson. For Goldman, straddles are primed for a move of $ 11.64, or 72% higher than the average move of $ 6.78, ORATS data shows. Meanwhile, Wells Fargo forks are implying a move of $ 1.51 on Wednesday, according to ORATS, just 0.5% higher than the average move of $ 1.45. Investors interested in buying porch should keep in mind that the house usually wins. The actual average “win rate” for cross-business buyers tracked by ORATS during earnings season for the past 12 quarters is 35%, which means that the average 65% of cross-buyers bought expires worthless. . For reference, the FactSet consensus for earnings per share is $ 3.09 for JP Morgan, $ 10.22 for Goldman, and 71 cents for Wells. Total revenue is expected to be $ 30.49 billion for JP Morgan, $ 12.56 billion for Goldman, and $ 17.52 billion for Wells. Don’t miss out: Corporate earnings growth could peak in a decade despite the COVID-19 pandemic. Analysts have become more optimistic about bank results in recent months, as the FactSet EPS consensus at the end of January for JP Morgan was $ 2.76, and it was $ 7.55 for Goldman and 60 cents for Wells. . In the past three months, JP Morgan shares are up 10.0%, Goldman is up 8.5% and Wells Fargo is up 17.9%, while the publicly traded fund SPDR Financial Select Sector XLF, a – 0.83% advanced 11.9% and the S&P 500 SPX index. , + 0.30% have gained 8.7%.