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October 2, 2012  Tue 11:42 AM CT

JPM: SEE CHART GET CHAIN FIND STRATEGIES
JP Morgan has been range-bound for the last few weeks, but a large player is combining stock and options in a strategy that will profit from a spike in either direction.

JPM is down fractionally this morning at $40.91. The banking giant has been trading in a range between $40 and $42 for the last three weeks. It was down below $31 at the start of June.

Topping the action in JPM is a huge print of 20,000 December 38 puts for $1.03, optionMONSTER's Depth Charge shows. The volume was 3 times the open interest in the strike at the beginning of the day, clearly indicating new a position.

Two minutes later the biggest block of stock traded as 560,000 shares went for $40.60. That exactly matches the delta of the overall option position, so it looks as if the trader is betting that the volatility in JPM will pick up in coming months, looking for a sharp move in either direction. (See our Education section)
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The sweet spot

When using the Stock Replacement Strategy, we must remember that in reality, we are doing a STOCK trade. We are just using options. We are replacing the stock position with an option position (long calls).

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