Pre-Earnings Bank of America Corp (BAC) Options Traders Target Key Level

Bank of America Corp (NYSE:BAC) will report earnings ahead of the opening bell on Monday

by Karee Venema

Published on Oct 14, 2016 at 11:10 AM
Updated on Jun 24, 2020 at 10:16 AM

Financial stocks are on the move today, after Citigroup Inc (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Co (NYSE:WFC) kicked off third-quarter bank earnings on a high note. Shares of Bank of America Corp (NYSE:BAC) -- which will take its own turn in the earnings confessional bright and early Monday morning -- were last seen up 1.2% at $16.02. The upside has sparked a fire in BAC's options pits, with calls trading at an accelerated clip.

By the numbers, around 127,000 BAC calls have changed hands so far, almost two times the amount typically expected to have traded at this point in the day. As a point of comparison, roughly 66,000 put options have crossed, which is also roughly double the average intraday amount.

Among the most popular options is BAC's weekly 10/14 16-strike call -- where close to 29,000 contracts have traded -- and it looks like some speculators may be selling to close their now in-the-money positions ahead of tonight's expiration. Elsewhere, the October 16 and 16.50 calls are most popular among front-month options, although it's not clear whether positions are being opened or closed here.

More broadly speaking, the 16 strike has been popular among pre-earnings options traders from both sides of the aisle. In fact, the October 16 strike is home to peak call and put open interest in the front-month series. Drilling down, roughly 124,917 calls reside here, compared to 79,248 puts.

BAC October open interest_

Looking at the charts, $16 has served a key role for BAC, especially of late. Specifically, the $16 region has worked as a magnet for most of the past two months. Longer term, the shares have surged roughly 46% off their mid-February three-year low near $11, but have yet to overtake their year-to-date breakeven level at $16.83.

BAC daily chart october 14

Meanwhile, it's been hit or miss for the stock in the session subsequent to reporting earnings over the past eight quarters, with Bank of America Corp (NYSE:BAC) splitting its time equally with both positive and negative earnings reactions. Regardless of direction, BAC stock has averaged a single-session post-earnings move of 2.8%, roughly in line with what the options market is pricing in for Monday's trading.

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