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Bullish bets on the rise in JPMorgan weekly call options

JPMorgan Chase & Co. (NYSE:JPM) – Trading traffic in JPMorgan call options this morning suggests some traders are positioning for shares in the U.S. bank to rally to their highest level since May by the end of the week. U.S. stocks are moving broadly higher on Monday and JPM shares advanced 2.3% to $41.40 by 11:30 a.m. ET, after the ISM’s U.S. factory index rose to 51.5 in September. Traders snapping up weekly calls on the stock are well-positioned to benefit from further upside in the shares in the near term. More than 6,300 calls have changed hands at the Oct. 05 ’12 $42 strike against previously existing open interest of 2,750 contracts. It looks like most of the calls were purchased for an average premium of $0.10 apiece, thus positioning buyers to profit in the event that JPM shares rally another 1.7% to top the average breakeven price of $42.10 by expiration this week. Shares in JPM, up more than 30% since the first full week in June, last traded above $42.10 on May 7th. The company is scheduled to report third-quarter earnings ahead of the opening bell next Friday.

JPMorgan Chase & Co (NYSE:JPM)

International Paper Company (NYSE:IP) – Shares in global paper and packaging company, International Paper Co., rose 0.85% on Monday morning to $36.63, and may soar to their highest in more than five years in the near future. The stock has moved sharply higher during the past 52 weeks, trading up 70% versus the first week of October 2011. A large bullish options play initiated on IP in the first hour of the trading day suggests one strategist is prepared for shares to extend gains into 2013. The trader appears to have paid a net premium of $1.12 per contract to buy a 5,000-lot Jan. 2013 $38/$42 call spread. The bullish position starts making money if shares in International Paper rally another 7% to top the effective breakeven price of $39.12. The trader could walk away with maximum potential profits of $2.88 per contract if shares in IP surge 15% to exceed $42.00 at expiration next year.

athenahealth, Inc (NASDAQ:ATHN) – Bearish activity in athenahealth put options today may be the work of a trader positioning for shares in the provider of cloud-based business services for physician practices to decline ahead of, or perhaps following, the company’s third-quarter earnings report after the close on October 18th. Shares in ATHN fell 0.50% by midday on the East Coast to stand at $91.35, but are up roughly 85% since the start of 2012. It looks like one trader purchased a 500-lot Oct. $80/$85 bear put spread at a net premium of $0.95 per contract. The put spread may represent an outright bearish stance on the stock, or could be a hedge to protect the value of a long position in the underlying shares. The strategy makes money if shares in the name slide 8% to breach the effective breakeven point at $84.05, with maximum potential profits of $4.05 per contract available in the event of a more than 12% dip in the stock price to $80.00 by October expiration.

Caitlin Duffy
Equity Options Analyst

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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