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

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

by 7/12/2013 2:55 PM
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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 QUALCOMM, Inc. (NASDAQ:QCOM). Here is a quick look at today's interesting activity in these options pits.

Bank of America Corp (NYSE:BAC) has rallied 1.9% today in the wake of better-than-expected earnings from sector peers JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC). The financial firm is expected to unveil its results before the market opens next Wednesday, prompting one group of speculators to bet that BAC's quarterly report will send the shares to levels not seen in more than two years. More than 48,200 July 14 calls have changed hands today, mostly at the ask price. Implied volatility has ticked higher, and data from the International Securities Exchange (ISE) confirms buy-to-open activity. The volume-weighted average price (VWAP) for the calls is $0.13, meaning traders will profit with each step north of $14.13 (strike price plus premium paid) BAC takes through next Friday's close. While this breakeven mark represents a slim 2.6% premium from the equity's current perch at $13.77, it also represents territory not charted since March 2011. However, BAC has been a technical stud during the past 52 weeks, tacking on a brow-raising 83.8%. What's more, the stock rallied up to $13.99 in late May. Should the stock fail to topple the strike price, though, the most the traders stand to lose is the initial premium paid.

Another day, another new high for Ford Motor Company (NYSE:F). Earlier in the session, the stock tagged the $17.09 mark -- its loftiest perch since January 2011. Not surprisingly, calls are outpacing puts by a margin of more than 3-to-1 today. One of the more active positions is the weekly 7/26 17.50-strike call, which has seen 1,306 contracts trade for a VWAP of $0.21. The majority of these calls have changed hands at the ask price, and implied volatility is on the rise, indicating the initiation of new bullish positions. In order for the call buyers to turn a profit, F must move 3.9% above its present price of $17.05 to topple breakeven at $17.71 by the close on July 26. Delta for the call is docked at 0.33, or 33%, suggesting a 1-in-3 chance the position will land in the money ahead of expiration. Given F's nearly 32% year-to-date advance, option players have tended toward the bullish side of the aisle in recent months. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 3.44 ranks in the 80th percentile of its annual range. In other words, calls have been bought to open over puts at an accelerated clip.

This call-skewed trend is witnessed in QUALCOMM, Inc.'s (NASDAQ:QCOM) options pits, as well, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.61. Not only does this show that call open interest outweighs put open interest among options expiring in three months or less, but it ranks in the 21st percentile of its annual range. Simply stated, short-term speculators are more call-heavy than usual. In today's session, the stock's July 62.50 call has emerged as a popular strike, where 83% of the 5,312 contracts traded have done so on the ask side. Implied volatility is on the rise, and data from the ISE points to buy-to-open activity. The VWAP for the calls is $0.27, making breakeven $62.77, or 1.6% above QCOM's current price of $61.80. While the sentiment surrounding F and QCOM falls on the same side of the fence, the technical backdrops paint a decidedly different story. Specifically, QCOM has struggled during the past three months -- shedding more than 7%, and lagging the broader S&P 500 Index (SPX) by north of 11 percentage points. Should the stock continue to underwhelm, an unwinding of this bullish sentiment could apply further pressure to the already-struggling shares.

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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