Stocks quoted in this article:
Option Brief: Action in Bank of America Corp's (NYSE:BAC) options pits is slower than usual today, but one of the two strikes that has seen a surge in trading is the weekly 1/10 16-strike call. Nearly 20,000 contracts have crossed the tape there, compared to just 98 contracts in open interest. Additionally, implied volatility is 1.3 percentage points higher, and 98% of the transactions have gone off at the ask price, suggesting the initiation of long positions -- a theory confirmed by data from Trade-Alert and the International Securities Exchange (ISE).
By buying the calls to open, today's speculators banked on the underlying muscling north of the strike price by the closing bell on Jan. 10, 2014 -- when the out-of-the-money options expire. Currently, BAC shares are about 5% short of that mark, hovering at $15.24. If the stock can topple that level, it will represent a new three-year high. However, should the banking name remain below $16 throughout the option's lifetime, the traders will part with 100% of the premium paid.
Elsewhere, on the fundamental front, Bank of America Corp (NYSE:BAC) is set to report its fourth-quarter earnings before the market opens on Wednesday, Jan. 15 -- a few days after the weekly options expire. Analysts are anticipating a profit of 27 cents per share, or nine times what BAC earned one year ago.