Bank Of America Stock Poised For Higher Highs

Bank of America options are attractively priced

Managing Editor
Jan 23, 2018 at 2:31 PM
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Bank of America Corp (NYSE:BAC) turned in a solid earnings report last week, and the stock has finished higher nine out of the last ten sessions as a result. The financial institution could have even more left in the tank, a sentiment echoed by some financial analysts. After earlier touching a nine-year high of $32.13, BAC stock was last seen trading at $31.94, and the shares may have just flashed a "buy" signal, as well. 

For example, the equity's Schaeffer's Volatility Index (SVI) of 18% is lower than all but 6% of the other readings from the past year, pointing to relatively attractive short-term premiums amid muted volatility expectations. Additionally, a lofty Schaeffer's Volatility Scorecard (SVS) reading of 86 suggests the security has tended to make outsized moves over the last 12 months, compared to what the option market has expected.

The other three times over the past 10 years BAC stock has been trading near new highs while its SVI has been ranked in the bottom 10th percentile of its annual range, the shares averaged a one-month gain of 5.73%, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Plus, the stock was positive each time a month later.

Bank of America stock has already added nearly 42% year-over-year. The shares have been guided higher by their rising 20-day moving average since an early-December bull-gap brought on by the tax reform bill. Analyst attention could vault the banking concern even higher, as 42% of brokerages covering BAC rate the shares a "hold." 

Calls have been favored over puts among short-term traders. This is according to Schaeffer's put/call open interest ratio (SOIR) of 0.49, which ranks in the 7th annual percentile. Digging deeper, the March 32 call is home to peak open interest, and according to Trade-Alert, there's been buy-to-open activity here. This indicates options traders are banking on a sustained uptrend from BAC in the coming months.

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