Something Big Going On In JPM Options

something anticipated arrives too late it finds us numb, wrung out from waiting,
and we feel – nothing at all. The best things arrive on time.”

Gilman, A New Kind of Country, 1978

I hope this quote isn’t
indicative of what
the market action will be when we get the announcement from
the Fed tomorrow. As we said back in December when they failed to move, when
the markets desperately needed action, the Fed set itself up to fail. Sure, we
all liked the half-point boost on January 3, but was it too late? I,
for one, feel that the Fed needs to make up for its December inaction by another
half-point cut. Without such firm action, the markets could resume their spiral
and force additional panic reactions rather than proactive offensive

As far as our dollar-weighted readings, Intel

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jumps off an otherwise lackluster semiconductor
sector, with EXPLOSIVE call action. 26,000 FEB 40 calls alone have traded,
indicating some pretty big bets are betting bullish on the king of all chip
stocks. On a dollar-weighted basis, we’re seeing 10:1 money flowing into calls
vs. puts.

Similar story in J.P. Morgan Chase & Co.
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where our indicators show 8:1 dollar-weighted call volume vs. put volume.
Someone pretty big is in there buying the September 55 calls and buying them in
size. More than 5300 have traded and the average block accumulation has been +1000
contracts. Betting on the Fed? Yeah, probably, but since it dwarfs the volume we’re
seeing in the rest of the banking sector, it could be something bigger. I smell
an upgrade!

Lastly, we saw some pretty interesting volume going on in
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. On the surface, it might appear that a 10:1 dollar-weighted put to
call ratio may foreshadow further downside action for the online bookseller.
However, we find that market makers, flipping deep in-the-money puts, account
for the majority of the put volume, so rather than indicating market direction,
the volume tells us virtually nothing. I just point this out to indicate that
you can never blindly follow any statistic. Keep in mind what Yogi said,
“There are lies, damn lies and statistics.”

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