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

BAC is seeing notable options trading activity today

by 8/9/2013 2:09 PM
Stocks quoted in this article:

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. Three names of notable interest this afternoon are Bank of America Corp (NYSE:BAC), Potash Corp./Saskatchewan (USA) (NYSE:POT), and BlackBerry Ltd (NASDAQ:BBRY).

POT is trading lower this afternoon, despite an early morning upgrade to "buy" from "hold" at BGC Financial. Unlike Tuesday's bulls, today's option players are placing their bets on longer-term technical struggles by picking up the March 32 put. BBRY has jumped more than 7% on reports that the company is contemplating going private. The positive price action has lit a fire among BBRY speculators, with calls and puts trading at roughly four times and two times the average intraday volume, respectively. Elsewhere, here is a quick look at the interesting activity in BAC's options pits.

Most

Bank of America Corp (NYSE:BAC) entered a brief period of consolidation after hitting a two-year high of $15.03 on July 23, but appears to have found a firm foothold in the $14.40-to-$14.50 region. In today's session, one group of speculators is betting on a quick bounce from this emerging layer of support to push the stock back to levels not seen since January 2011. One of the more sought-after strikes is the August 15 call, where 17,491 contracts -- including several mid-sized blocks -- have changed hands for a volume-weighted average price (VWAP) of $0.04. The majority of these near-the-money calls have crossed on the ask side, and implied volatility is up 2.8 percentage points, hinting at buy-to-open activity. In order for these front-month calls to be profitable, BAC must muscle above $15.04 (strike price plus VWAP) by next Friday's close. This breakeven mark represents expected upside of 3.9% to the stock's current perch at $14.48. Should Bank of America fail to take out the strike price by the time the calls expire, the most the traders stand to lose is the modest premium paid. With BAC's Schaeffer's Volatility Index (SVI) of 20% ranking lower than 99% of similar readings taken in the past year, the speculators can rest easy knowing they picked up these bullish bets at a relative bargain.

From a contrarian perspective, BAC could be poised to encounter some analyst-related tailwinds in the near term. Despite the stock's 87.5% year-over-year advance, around 70% of covering analysts maintain a "hold" or "strong sell" recommendation toward Bank of America, and the consensus 12-month price target of $15.01 sits just 3.7% above present trading levels. Should the stock continue its trek into multi-year high territory, an additional round of upgrades and/or price-target hikes could add fuel to BAC's fire.


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