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Option Brief: Bank of America Corp (NYSE:BAC) call volume outstripped put activity by a significant margin yesterday. In fact, the four most active strikes were calls. Taking the top position was the financial institution's February 17 call.
Digging deeper, close to 11,000 contracts traded at the out-of-the-money strike -- 53% at the ask price, suggesting they were purchased. What's more, implied volatility inched higher and open interest picked up nearly 3,900 positions overnight, indicating the creation of new bullish bets.
By purchasing the BAC calls to open, yesterday's traders are looking for the stock to topple the 17 strike by the closing bell next Friday, Feb. 21, when front-month options expire. In other words, the shares need to gain roughly 2% over the next six-plus sessions in order to move into the money, based on their current price of $16.68. If that advance doesn't occur, the options will expire out of the money, and the speculators will forfeit the initial premium paid as their maximum potential loss.
Technically speaking, Bank of America Corp (NYSE:BAC) has tacked on an impressive 37% in the last year. In mid-January, the stock gapped higher on a solid fourth-quarter earnings report, and touched a multi-year high of $17.42. Since then, BAC has been see-sawing in the $16-to-$17 range.