These 20 stocks are about to experience an explosive end-of-year rally, JPMorgan says

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• A late-year rally related to progress on trade relations between the US and China is likely, according to derivatives strategists at JPMorgan.
• The firm identified stocks with cheap out-of-the-money options that traders can buy to profit from price gains.

The stock market has taken a beating in the final stretch of 2018. This means opportunities abound to find stocks that will be the biggest beneficiaries of a rebound.

"With investors now positioned defensively, and leverage rapidly reduced, there is an elevated risk of market reversion into year-end, thus an elevated risk of an October 'rolling bear market' turning into a 'rolling squeeze higher' into yearend," JPMorgan derivatives strategists said in a recent note.

This rally may be triggered by share buybacks, portfolio rebalancing, the mid-term elections, and progress on trade. That fourth factor would be the most unexpected catalyst for stock gains - and it hinders on President Donald Trump and President Xi Jinping having a fruitful discussion at the late-November G20 summit, the strategists said.

JPMorgan recommended the list of Russell 1000 stocks below as having cheap, limited-loss out-of-the-money call options (~110%), or bets that their prices will rise. Analyses of their earnings-call transcripts suggest that they're the most exposed to trade risks - and the strategists like their reward-to-risk profiles.

Additionally, JPMorgan screened only for stocks where it sees a more than 15% upside to their six-month high.