NEW YORK - JPMorgan Chase & Co has gradually increased the risk it takes trading commodities and the second-largest U.S. bank is approaching levels last seen before the financial crisis rocked global markets.

JPMorgan, which reported earnings on Wednesday, has increased the risk it takes in commodities by about 36 percent since the first quarter of 2009 but levels are down 7 percent from this time last year.

I think you're seeing momentum in the markets now but momentum is something that could be a vicious thing. It can help you or kill you, said Matt McCormick, a banking analyst at Bahl & Gaynor.

Risk is typically measured by the maximum amount of money a bank could lose in a single day, or its value-at-risk (VaR). In the third quarter of 2009, JPMorgan risked $38 million a day, up from $34 million in the second quarter and $28 million in the first quarter. At this time last year, JPMorgan's VaR was $41 million. It was as high as $46 million in the third quarter of 2006.

Analysts read that as a sign of JPMorgan's caution over trading risks since the financial crisis erupted, despite the rebound in financial markets. Aside from its commodities exposure, JPMorgan's VaR in equities was down 65 percent from a year ago.

The Reuters-Jefferies CRB index .CRB, a widely watched barometer for commodities, hit 11-month highs on Wednesday. The S&P 500 index of top U.S. stocks is up 20 percent so far this year.

Political pressure could also be a reason for JPMorgan to contain its risk appetite, McCormick said.

My guess is that while they want to be in a sweet spot where they can have their commodity trades accredited to earnings, they don't want their VaR to increase dramatically and be potentially detrimental to future earnings, he said.

I don't think anybody wants to go through another situation where they have to have capital raises, especially with politicians focusing on the type of risks they've had.

JPMorgan did not give a breakdown for its commodity earnings. But it said trading gains from fixed income markets -- which usually includes commodities -- rose to $5 billion, up from $800 million a year earlier. It posted a third-quarter net income of $3.6 billion, or 82 cents a share, compared with $527 million, or 9 cents a share, in the same quarter last year.

The bank's commodities operations also expanded in the third quarter, with headhunters reporting that it hired four coal industry specialists for its London operations.

JPMorgan is the first among Wall Street banks to report third-quarter results. Citigroup and Goldman Sachs Group Inc are due to report on Thursday and Bank of America on Friday.

(Editing by Lisa Shumaker)