Three of the big Wall Street banks report quarterly earnings at the tail end of this week. For investors looking ahead to Citigroup, Wells Fargo and J.P. Morgan Chase earnings on Friday morning, the options market appears to be saying, “Nothing to see here.”
Stacey Gilbert, head of derivative strategy at Susquehanna, explained Tuesday on CNBC’s “Trading Nation” what the options are implying for shares of the big banks later this week.
• Financial stocks don’t typically see extreme moves on their earnings reports, but are among the most important watchers during earnings season.
• Shares of Citigroup, Wells Fargo and J.P. Morgan usually see a move in the ballpark of 2 percent in either direction following their reports. Right now, the options market is implying a move of less than 2 percent for each of these names.
• Notably, while the trend is broadly bullish across the financials’ exchange-traded funds, the options are not implying any particularly outsize moves for the individual names. For investors who’d like to protect any recent gains, the options are relatively cheap at current levels.
• The financials have not fared well this year, with the sector falling nearly 3 percent year to date while the market has risen 4.5 percent. While Citigroup has sunk more than 8 percent this year and Wells Fargo is down nearly 7 percent in the same time frame, J.P. Morgan shares are barely negative on the year.
Bottom line: The options market is pricing in smaller-than-usual moves for some of the big banks reporting later this week.
Here’s how Citi, JPMorgan and Wells Fargo could move when they report earnings this week