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Options Action Recap: Trading JPM and California's Gasoline Shortage

Time to short financials, and bet on gasoline refiners? Those were the two big calls that the traders made on Friday’s episode of “Options Action.”

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Let’s get into the trades on JPMorgan and Valero .

RiskReversal.com’s Dan Nathan looked at a one-year chart of JPM, and saw something very interesting. In the past year, the stock rose 39 percent, then fell 39 percent, then climbed 36 percent.

Even if that isn’t bearish on its face, it at least looks like a quite exciting chart for an options trader. Further, Nathan thinks that despite the enthusiasm over Romney’s debate performance, Obama will still win the election — and he sees this as being bad news for JPMorgan shareholders.

That said, Nathan does not think that JPMorgan will see a big downward move off of earnings. And because he thinks the stock will fall in November, but not in October, he suggests buying the October/November 41-strike calendar put spread for just $0.50.

His trade and breakdown are below.

DAN’S JPMORGAN TRADE:

• SELL OCT 41-STRIKE PUT FOR $0.50

• BUY NOV 41-STRIKE PUT FOR $1.00

HOW DAN'S JPMORGAN TRADE MAKES MONEY:

• LOSSES ABOVE $40.50 BY NOV EXPIRATION

• PROFITS BELOW $40.50 BY NOV EXPIRATION

On to the trade on Valero. Oppenheimer’s Carter Worth looked at several charts of the petroleum refiner, and made the case that the stock would make a big move “into the 40s or better.” CRT Capital’s Mike Khouw had a different reason for liking the name, and it has to do with the gasoline shortage in California.

Valero owns some of the few refineries that can produce gasoline cleared for sale in California.

The outage, Khouw said, could add some $600,000 a day to Valero’s bottom line. And to cap it off, we’re talking about a company that’s quite cheap relative to the S&P.

So to express his well-honed bullish thesis, Khouw recommended buying the December 36-strike call for $0.95. And it seems that plenty of people thought he had a point — after all, as of noon Monday, the Dec. 36-call was the most-traded Valero call of any expiry.

Khouw’s trade and breakdown:

MIKE’S VALERO TRADE:

• BUY THE DECEMBER 36-STRIKE CALL FOR $0.95

HOW MIKE’S VALERO TRADE MAKES MONEY:

• PROFITS ABOVE $36.95

• LOSSES BELOW $36.95

Watch Options Actionon CNBC Fridays 5:00pm ET, Saturdays at 6a ET and on Sundays at 6a ET

Questions, comments send them to us at: optionsaction@cnbc.com

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