How One Bank of America Corp (BAC) Option Bull Banked $8.8 Million

Amid a post-election surge in financial stocks, one Bank of America Corp (NYSE:BAC) rolled her February 17 calls up to the 20 strike

Nov 15, 2016 at 3:17 PM
facebook X logo linkedin


Call volume is accelerated in Bank of America Corp's (NYSE:BAC) options pits today. By the numbers, around 499,000 call options have traded -- two times what's typically seen at this point in the day, and on track to finish in the 97th percentile of its annual range. As a point of comparison, just 141,000 BAC put options are on the tape. Drilling down, BAC's top two options trades are the February 17 and 20 calls, where it looks like one speculator is closing out of her massive winning position, and betting on even more upside for the bank stock.

Specifically, one option trader apparently sold to close a 40,025-contract lot of February 17 calls for $2.91 apiece, which Trade-Alert suggests was initially opened on Oct. 21 for $0.70 cents each. If this is the case, the speculator banked a cool $8.8 million profit [($2.91 - $0.71) * number of contracts * 100 shares per contract). The trader then used this profit to purchase a symmetrical block of February 20 calls, betting on a breakout above the round-number $20 by February options expiration.

More broadly speaking, options traders have been quick to initiate long calls over puts in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BAC's 50-day call/put volume ratio of 4.11 ranks just 6 percentage points from a 52-week peak.

Echoing this call-skewed backdrop is BAC's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.78. What this shows is that near-the-money call open interest outweighs put open interest among options expiring in three months or less.

This lofty accumulation of call open interest could present a short-term speed bump for BAC, especially considering there are more than 21,000 contracts outstanding at the just overhead November 20 strike. In fact, BAC closed at $20.08 last Friday, and was last seen down 0.05% at $19.99. Longer term, Bank of America Corp (NYSE:BAC) is up 19% year-to-date, most recently helped by a post-election rally in the financial sector.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.
 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI