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Recent History Favors Pre-Earnings Bank of America Corp (BAC) Bulls

Bank of America Corp will report earnings ahead of the April 16 open

by 4/3/2014 9:47 AM
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Option Brief: Calls were once again the preferred contracts in Bank of America Corp's (NYSE:BAC) options pits on Wednesday, outpacing puts by a more than 4-to-1 margin. Approximately one-quarter of the day's call volume centered on BAC's April 18 call, and by the looks of it, a number of traders bet on another earnings-induced boost for the financial firm.

Nearly 53,800 contracts traded at this out-of-the-money strike, the majority of which did so at the ask price, pointing to buyer-driven activity. Implied volatility rose 2.2 percentage points on the day, and almost all of the positions translated into open interest overnight -- the most of any equity options traded on Wednesday. In other words, it seems safe to say that new bullish positions were initiated.

As touched upon, BAC is scheduled to take its turn in the earnings limelight before the market opens on Wednesday, April 16 -- the session before front-month options expire. Recent history tends to favor BAC bulls, considering over the past three quarters, the stock has advanced an average of 2.4% in the session following its quarterly results.

However, this positive price action just highlights BAC's withstanding momentum, with the shares up nearly 46% year-to-date to trade at $17.18. What's more, after tagging a three-year high of $18.03 in late March, BAC pulled back to its 40-day moving average, and bounced. This rising trendline has long served as a springboard for Bank of America Corp (BAC) shares.


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