Weekly Options Traders Weigh In On Bank of America, Goldman Sachs Stocks

Shares of Bank of America and Goldman Sachs are struggling as the Trump trade comes into question

Mar 27, 2017 at 11:26 AM
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The 20 stocks listed in the table below have attracted the highest weekly options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are financial stocks Bank of America Corp (NYSE:BAC) and Goldman Sachs Group Inc (NYSE:GS). Here's a quick look at how options traders are lining up on BAC and GS shares, which are being hit hard by fears the Trump trade is overdone.

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Options Traders Target Bank of America Calls

BAC options traders have been targeting calls over puts lately. The bank stock's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is a top-heavy 3.96 -- just 10 percentage points from an annual peak. Not to mention, BAC's Schaeffer's put/call open interest ratio (SOIR) of 0.56 is lower than 83% of readings from the past year.

In today's options trading, the weekly 3/31 24-strike call is most active among all stocks, with almost 17,000 contracts on the tape. From the looks of it, the calls are being bought to open, as short-term speculators are counting on the financial shares to muscle back above $24 by Friday's close, when the series expires. 

However, as alluded to, concerns about the Trump administration's ability to implement regulatory reforms are weighing on bank stocks, and Bank of America shares are no exception. BAC was last seen 2% lower at $22.66, and since topping out earlier this month near $26, the stock has surrendered over 12% of its value.

Goldman Sachs Options Trader Initiates Collar

GS stock is getting hit even harder, down 2.3% at $223.19. Since notching an all-time high of $255.15 on March 1, the shares have sunk 12.5%, and are hovering near levels last seen in early December, when the Trump rally was in full swing. Even before today's drop, GS sported a 14-day Relative Strength Index (RSI) of 25 -- in oversold territory.

Not surprisingly, put activity has picked up among GS options traders. While call-skewed on an absolute basis, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.72 ranks in the high 79th percentile of its annual range.

Today, both calls and puts are trading at nearly triple their expected intraday rate, and weekly options remain in focus. The two most active Goldman Sachs options are the weekly 3/31 225- and 232.50-strike calls. The ISE indicates one GS trader may have constructed a collar by buying to open 1,000 protective puts at the weekly 3/31 212.5-strike put, and selling to open 1,000 covered calls at the weekly 3/31 232.50-strike call.

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