JPMorgan and Wells Fargo kicked off the bank earnings season with mixed results Friday. JPM reported its first quarterly loss under CEO Jamie Dimon, while Wells reported earnings per share of 99 cents, beating expectations 97 cents.
(Read more: JPMorgan sees some ugly firsts with earnings)
Well Fargo's results marked the 10th straight quarter of record profits, but the stock was down Friday morning, and one trader is loading up on puts. With shares at $40.66, we saw someone initiate a bearish position by buying 4,000 October 40.50-strike puts on Wells Fargo for 45 cents each. This is a bearish bet that breaks even if the stock is below $40.05 by expiration next Friday.
Wells' profits may have been strong, but bears are selling its shares because of its exposure to rising interest rates. Wells is the nation's largest home lender, which means that the bank felt the effects of lower loan and refinancing volume in the third quarter. Given that interest rates spiked, it should not be shocking that refinancings are down, but bank shares could nonetheless get hit short term as the market prices in this reality.