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Option Brief: Bank of America Corp (NYSE:BAC) bulls are making a bold prediction today, and are calling for a move to levels not seen in more than three years. Specifically, 34,222 January 2014 17-strike calls have changed hands, including several large blocks. Nearly all of these contracts have gone off on the ask side, implied volatility is 2.5 percentage points higher, and data from the International Securities Exchange (ISE) confirms the presence of buy-to-open activity.
The expectation for purchasing the out--of-the-money calls is for BAC to rise 11% from its current perch over the next five-plus weeks. As touched upon, though, the stock has not traded north of the strike since May 2010, and accordingly, delta for the call is resting at 0.12, suggesting a slim 12% chance the option will expire in the money. Should Bank of America fail to topple the $17 mark ahead of the Jan. 17 close, the most the call buyers stand to lose is the initial premium paid. According to Trade-Alert, the volume-weighted average price for the calls is a modest $0.07 apiece.
Although BAC hasn't traded north of $17 since mid-2010, the equity has still had a solid showing on the charts over the past 52 weeks, tacking on roughly 44%. In fact, the equity hit a three-year high of $15.98 in late November, before easing back to its current perch at $15.31. The positive price action is continuing in today's session, after Bank of America Corp (NYSE:BAC) announced a settlement with the Securities and Exchange Commission (SEC) over allegations that its Merrill Lynch division misled investors.