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Most Active Options Update: Bank of America Corp (BAC)

Bank of America Corp option traders target continued gains

by 7/2/2014 1:04 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest among option bulls this afternoon is Bank of America Corp (NYSE:BAC).

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Bank of America Corp is up 2.4% this afternoon, thanks to an early morning upgrade and price-target hike at Deutsche Bank. The move north has caused the stock's intraday call volume to spike to three times what's typically seen at this point in the day, with the contracts outpacing their put counterparts by a roughly 4-to-1 margin.

Receiving notable attention among option players is BAC's weekly 7/3 16-strike call, where 24,267 contracts have changed hands. The majority of these calls went off at the ask price, and volume outstrips open interest, making it safe to assume new positions are being purchased. With BAC trading near $15.98, these calls are right at the money. However, in order for the call buyers to profit, the stock must be sitting north of breakeven at $16.05 -- the strike plus the volume-weighted average price (VWAP) of $0.05 -- at tomorrow's 1:00 p.m. ET close.

Meanwhile, the most active BAC option thus far is the August 17 call, where 42,984 contracts are on the tape. Nearly all of these calls traded on the ask side -- primarily in one large sweep -- and implied volatility is up 1.4 percentage points, indicating buy-to-open activity. The VWAP for these out-of-the-money calls is $0.11, meaning the call buyers will profit if BAC is perched above $17.11 at the close on Friday, Aug. 15, when back-month options expire. Gains for both sets of traders will accumulate with each step above the respective breakeven marks BAC takes, while losses are limited to the initial cash outlay, should the equity settle below the strikes at expiration.

On the fundamental front, Bank of America Corp (NYSE:BAC) is scheduled to report quarterly earnings ahead of the bell on Wednesday, July 16. For the company's second quarter, analysts are calling for a per-share profit of 30 cents -- a 2-cent drop from BAC's year-ago results.


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