Goldman Sachs was priced for a $36 move on earnings.
Early this morning, it had moved six bucks. And Goldman’s numbers weren’t the problem, either. Equities revenue was up 72% from a year ago.
The expected move is how far the options market is pricing a stock to travel by a certain date, in dollars. JPMorgan was priced for a $10 move and moved a dollar. Citi had a $5 expected move and moved two bucks.
And Wells Fargo, do I even need to cover Wells? It was priced for $3.80 and barely moved a buck.
Not one of these was anywhere near its expected move. That in and of itself is an anomaly.
Why Retail Traders Ignore The Biggest Banks In America
JPMorgan reported earnings and traded only 40,000 option contracts around the open.
Nobody’s trading anything in here.
Retail doesn’t even know what JPMorgan is. They don’t know who Jamie Dimon is, and I’m dead serious. He’s the only big-bank CEO still standing from the financial crisis.
Two weeks ago, I went to the Robinhood conference. Robinhood has about 28 million customers, and they trade roughly 14 million option contracts a day. On a decent day, the entire market trades about 70 million.
One brokerage is doing a fifth of the whole options market. And these people aren’t stupid, I want to be clear about that. They don’t look at the things you’d classically look at in the market.
They’re slinging option contracts like there’s no tomorrow, in SpaceX, Nvidia and Meta, the stuff they know. The banks don’t have the juice.
Why The Banks Could Still Have A Funky Ride Today
None of these stocks used up their expected move, and that leaves room. By late morning, Goldman had moved $15. If it rips another 15 bucks, it pulls the XLF, the fund that holds the big financial stocks, right along with it.
I’m in a bullish spread on the XLF, an options trade that buys one strike and sells another to cut the cost. It expires Friday, so I’m going to sit here and watch this thing all damn day. Bank of America and Morgan Stanley are still on deck.
My line is $55.50 on the XLF by Friday. At $55.50 and above, my spread is fully profitable, and if the banks can’t get it there, I’ll take it off at breakeven.
We’re not done by a long shot.
To your success,
Don Kaufman
