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Bank of America Corp (BAC) Trader Sees Trouble Ahead

How one Bank of America Corp shareholder may be bracing for a pullback

by 12/26/2013 3:13 PM
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Option Brief: Although Bank of America Corp (NYSE:BAC) has tacked on an impressive 35% in 2013, one speculator in today's session is betting on the stock to run out of steam over the next couple of weeks. Shortly after noon on the Chicago Board Options Exchange (CBOE), a massive block of 15,000 weekly 1/10 14.50-strike puts changed hands at the ask price of $0.03 apiece. Only 306 contracts currently make up open interest here, and Trade-Alert marked the the block as "opening."

BAC was trading south of the strike price as recently as Nov. 13, but delta for the put is docked at negative 0.05, suggesting a slim 5% chance of an in-the-money finish. Should the stock maintain its perch north of $14.50, the most today's put buyer stands to lose is the initial cash outlay of $45,000 (the number of puts, times the premium, times 100 shares per contract).

As noted, Bank of America Corp (NYSE:BAC) has put in a respectable showing on the charts this year. As such, today's put buying activity could be the work of a shareholder looking to hedge against a near-term pullback. At last check, the stock was down a slight 0.2% today to trade at $15.66.


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