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Bank of America Corp (NYSE:BAC) is up more than 8% in May alone, but that hasn't stopped option speculators from crowding the bearish bandwagon. Over the last two weeks, the equity's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has reached 0.51, which is just 7 percentage points shy of an annual peak. In other words, although calls are still being purchased to open at a roughly 2-to-1 rate over puts, the ratio is higher than it has been at most points during the past year.
In a similar vein, Schaeffer's put/call open interest ratio (SOIR) for BAC is perched at 0.97, indicating that call open interest and put open interest are near parity within the front three months' series. What's more, this ratio is among the top quartile of annual readings, suggesting the options crowd is more put-focused than usual.
In today's session, Bank of America option volume is notable across the board. While call volume is 47% higher than what's typically expected, put volume is close to twice the norm. One strike seeing notable attention is the January 2015 12-strike put, where more than 8,000 contracts have traded. Additionally, the largest block of the day crossed at this LEAPS strike, as a 5,000-lot changed hands at the ask price of $1.52 per contract.
Nearly all of the volume at this out-of-the-money strike has traded at the ask price, in fact, and implied volatility is inching higher, which are both signs of buy-to-open activity. With the stock up half a percent today at $13.38, these are fairly aggressive bets that the shares will stumble over the long term. Given the modest premium and the relatively low strike price (the strike is 10.3% south of the stock's current perch), these could also be the work of BAC shareholders hedging to protect their profits.
Of course, a 10% move over the course of 19 months certainly wouldn't be out of the question. Bank of America Corp (NYSE:BAC) shares have gained an impressive 94% since their late-July low of $6.90, and yesterday hit a new two-year high. Should this strength continue (and assuming today's LEAPS weren't of the protective nature), today's put buyers could bail out of these trades long before January 2015. Delta currently stands at -0.34, with the options market assigning a roughly 1-in-3 chance expiring in the money.