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Bank of America Corp (NYSE:BAC) option traders have been scooping up long calls at a feverish pace in recent weeks, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the course of the past 10 sessions, in fact, more than six calls have been bought to open for every put. What's more, the resulting call/put volume ratio of 6.23 ranks in the 98th percentile of its annual range, pointing to a bullishly skewed backdrop in BAC's options pits.
It's a similar set-up in today's trading, where roughly 42,000 calls have changed hands thus far -- a 20% mark-up to the intraday average -- compared to roughly 11,000 puts. The most active strike resides in the back-month series; specifically, BAC's July 17 call, where almost all of the 15,592 contracts traded -- largely a result of two massive sweeps totaling 13,985 -- have done so on the ask side. Meanwhile, implied volatility has edged higher, suggesting new positions are being purchased.
The out-of-the-money calls are being scooped up for a volume-weighted average price (VWAP) of $0.09, making at-expiration breakeven for today's call buyers $17.09 (strike plus VWAP). Gains are theoretically unlimited with each notch above this mark BAC is sitting at the close on Friday, July 18 -- when the options expire -- while risk is limited to the initial premium paid, should the stock finish south of this mark at expiration.
Technically speaking, BAC had a strong start to 2014, but turned lower after topping out at a three-year high of $18.03 in late March. Although the equity has regained roughly 10% of its value since bouncing off its 320-day moving average in mid-May, Bank of America Corp (NYSE:BAC) is only up a slim 1.5% on the year. In today's session, the equity is following in the bearish footsteps of the broader equities market -- last seen 0.2% lower at $15.81.