Option Bulls Blitz Bank of America Corp (BAC) On Hawkish Fed Talk

More than 220,000 call options have traded on Bank of America Corp (NYSE:BAC) today

Sep 9, 2016 at 11:38 AM
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Bank of America Corp (NYSE:BAC) was up as much as 1.8% earlier, after one Fed official took a relatively hawkish stance toward interest rates. At last check, the bank stock had pared these gains, but was still 1% higher at $16.03. Options traders, meanwhile, are flooding BAC stock, with the contracts crossing at two times what's typically seen at this point in the day. Calls hold a commanding lead over puts, too, with about 222,000 of the former and 91,000 of the latter on the tape at last check.

Drilling down, almost half of the day's call volume has centered at the September 16 call, where 102,851 contracts have traded -- due mostly to a massive block of roughly 60,000 contracts that crossed earlier for 18 cents apiece. According to Trade-Alert, this block may have been bought to open. If this is the case, the goal is for BAC to extend its rally north of $16 through next Friday's close, when the front-month options expire.

From a wider sentiment perspective, today's call-skewed session is nothing new in BAC's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a top-heavy 10-day call/put volume ratio of 4.08. What's more, this ratio ranks in the elevated 72nd annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

Echoing this is BAC's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.44. In other words, near-the-money calls more than double puts among options slated to expire in three months or less.

With nearly 71% of analysts covering the shares maintain a "buy" or better rating, this glass-half-full approach is seen outside of the options arena, as well. However, short sellers have been taking a more bearish stance of late, with short interest surging nearly 32% in the two most recent reporting period. In fact, while the 100.9 million shorted BAC shares account for less than 1% of the available float, it's the loftiest amount of bearish bets levied toward the stock since last October.

On the charts, Bank of America Corp (NYSE:BAC) has surged 33% since panning the $12 level in late June. More recently, though, the stock's rally has run out of steam in the $16.25 region, home to BAC's early-January post-bear gap lows.

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