One component of a bank's revenue comes from mortgages. Generally, the bank issues a mortgage that is correlated with the interest rate of long-term Treasury bonds.
In order to hedge their lending from mortgages, banks primarily borrow from the Fed and pay out short-term interest rates. The long-term interest rates keep rising, but the Fed has indicated that it is unlikely that short-term interest rates will change in the near future.
This is great news for the banks, because it means that banks will profit off of the widening spread. The average mortgage rate is about 4.25 percent, while the bank can borrow from the Fed at the discount rate of only 0.75 percent. A wider spread for banks means greater profit per mortgage issued.
On Thursday, we are seeing heavy volume in JPMorgan. The most actively traded option is the 55-strike call expiring on Friday, which has mostly been bought Thursday, rather than sold.
With the stock backing off from the highs, it seems like a late-day rally or a rally off of Friday's earnings is eminent, as call buyers will only profit if this stock is above $55 Friday at the close of business.
I am long JPM, and seeing this trade certainly gives me confidence that holding the stock through earnings will pay off.