Bullish Options Traders Blast Booming Bank of America Stock

The bank stock could now find support atop $28

Dec 4, 2017 at 9:10 AM
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Bank stocks are getting ready to rally, after the U.S. Senate passed the Republican tax plan over the weekend. Shares of Bank of America Corp (NYSE:BAC), for instance, are up 2.5% in electronic trading -- on track to open at their highest mark since October 2008 -- as the business-friendly piece of legislation now heads to reconciliation between the House and Senate.

Today's projected price move is just more of the same for the financial shares. Heading into today's trading, BAC stock was up 27.2% year-to-date -- and hit a nine-year high of $28.72 on Thursday, before settling the week at $28.10. The equity is now trading above potential support at $28, home to its late-October and early November highs.

Against this upbeat technical backdrop -- and ahead of a mid-December Fed meeting in which a rate hike is highly expected -- options traders have been extraordinarily busy buying to open calls over puts. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, speculators have initiated 482,067 long calls in the last 10 days, compared to 80,679 puts. Plus, the resultant call/put volume ratio of 5.98 ranks higher than 96% of all comparable readings taken in the past year.

And it's not all that surprising options bulls have been targeting Bank of America stock, considering it has consistently rewarded premium buyers over the past year. Specifically, BAC's Schaeffer's Volatility Scorecard (SVS) of 92 indicates the shares have made bigger-than-expected moves over the last 12 months, relative to what the options market has priced in.


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