American Express Options Showdown: Bulls on the Rise

American Express

Following American Express’s (NYSE:AXP) fourth-quarter profits surging by 23% compared to the previous year, investors responded positively, propelling AXP stock by 7%. This optimistic reaction comes amid a resilient U.S. economy, which showcased a growth rate of 3.3% in the final quarter of 2023. The positive financial disclosure and the economic performance position AXP as a potentially favorable investment.

Economic Resilience and Consumer Behavior

The robust showing of the U.S. economy in the face of inflation and rising interest rates has contributed to the bullish sentiment surrounding AXP stock. Despite concerns about consumer spending sustainability, American Express reported a significant 17% increase in maintained balances, potentially translating into higher interest income for the credit card issuer.

However, there are conflicting indicators, such as a rise in delinquencies and credit losses, raising questions about consumer financial stability. The shift in consumer behavior towards saving, as reflected in the increased personal saving rate in 2023, further complicates the outlook. Higher interest rates incentivize saving and penalize spending through opportunity costs.

Options Trading and Market Sentiment

The options market for AXP stock presents a battleground between bulls and bears. Notably, AXP featured as a top highlight in Barchart’s screener for unusual stock options volume, with total volume reaching 133,106 contracts against an open interest reading of 283,519. Call volume outweighed put volume, resulting in a put/call ratio of 0.64, favoring the bulls.

Examining significant trades on Fintel’s options flow screener, institutions made notable transactions, including selling put contracts with minuscule income. These transactions imply a neutral to bullish sentiment, as investors are willing to buy AXP stock at specified strike prices while collecting income from the sold puts.

However, the standout transaction was the sale of 1,694 contracts of the Apr 19 ’24 210.00 Call, generating a premium of $424,530. This aggressive wager suggests a belief that AXP stock won’t significantly surpass the $210 strike. If it does, the call writer must sell shares at the lower strike price.

Gamma Exposure and Risk Factors

AXP’s gamma exposure (GEX) score sits at -1, indicating that as the stock rises in value, the underlying options position becomes less sensitive to further increases. This is especially relevant given the heavy interest in sold calls. A negative GEX makes the short call less valuable with a rising stock price.

Investors are advised to monitor the GEX closely, as an increasing negative value could amplify losses for those holding short call positions against AXP stock. This heightened risk raises the potential for a gamma squeeze, impacting the dynamics of options trading.


While AXP stock could potentially swing higher, fueled by optimism and strong financial performance, caution is advised. The data suggests that shorting AXP might not be a prudent move. The overall sentiment points towards a buy recommendation, considering the positive financials and the profile of AmEx cardholders, who tend to be in a better financial position than the average consumer. However, the complexities of options trading and risk factors should be carefully considered in crafting an investment strategy for AXP.

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