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Most Active Options: Bank of America Corp (BAC), Ford Motor, Citigroup

BAC, F, and C are seeing notable options trading activity today

by 5/2/2013 2:32 PM
Stocks quoted in this article:

Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Bank of America Corp (NYSE:BAC), Ford Motor Company (NYSE:F), and Citigroup Inc (NYSE:C). Here is a quick look at today's interesting activity in these options pits.

Bank of America Corp (NYSE:BAC) has followed the Dow into the green today, and at last check, the stock was up 0.4% to linger near $12.19. This positive price action has some bullish option players hitting the exits, hoping to cash in on a profit ahead of tomorrow's weekly options expiration. The stock's weekly 5/3 12-strike call is the most active position today, where 10,243 contracts have crossed at a volume-weighted average price (VWAP) of $0.15. The majority of these calls have changed hands at the bid price, and data from the International Securities Exchange (ISE) confirms that a number of these positions were sold to close. Today's run higher is just more of the same for a stock that boasts a year-over-year advance of more than 49%. However, the brokerage bunch remains skeptical of the Bank of America's ability to sustain this upward momentum. No fewer than 15 out of 26 analysts maintain a "hold" or "strong sell" suggestion toward the stock, and the consensus 12-month price target of $13.07 represents a tepid 7.2% premium to BAC's current perch. Should the stock continue to impress on the charts, an additional round of upgrades and/or price-target hikes could create a contrarian boon for Bank of America.

Ford Motor Company (NYSE:F) is higher in today's session, thanks to some upbeat expansion news. One optimist is betting on a trek into multi-month high territory for Ford Motor over the next week. Earlier in the session, three blocks totaling 2,881 contracts of F's weekly 5/10 14-strike calls went off at the ask price of $0.05, and implied volatility ticked higher, hinting at buy-to-open activity. In order for these out-of-the-money calls to be profitable, F must move north of $14.05 (strike price plus premium paid) by next Friday's close, when the options expire. This breakeven mark not only represents expected upside of 4.5% to the equity's present price of $13.45, but territory not explored on an intraday basis since Jan. 22. Delta for the call checks in at 0.15, suggesting a slim 15% chance the position will land in the money ahead of expiration. Should Ford Motor fail to topple the strike price over the next six or so sessions, the most this trader has risked is the modest premium paid.

Citigroup Inc (NYSE:C) option traders are taking a their bullish approach out a couple years, and are implementing a long call spread using January 2015 65 and 70 strikes. One block of 4,979 contracts changed hands at the lower strike at the ask price of $1.47, while a symmetrical block crossed at the higher strike at the bid price for $0.88. Volume outstrips open interest at both strikes, making it safe to assume that new positions were created. By selling the higher-strike call, the speculator has reduced her cost of buying a straight "vanilla" call, and has limited her risk to the initial net debit of $0.59. However, she has also restricted her reward to $4.41 per pair of contracts (the difference between the two strikes less the net debit), regardless of how high C climbs north of $70 through expiration. Breakeven for the spread sits at $65.59 (bought strike plus premium paid), or 41.2% above the equity's current perch at $46.46. While a move of this magnitude may seem grand, the stock is sporting a 52-week advance of nearly 42%.

The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

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