Put Buyers Blast BAC; Option Bulls Flock to Broadcom Stock

Both BAC and AVGO stocks have seen unusual option activity lately

Managing Editor
Aug 28, 2017 at 3:24 PM
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There's been notable options volume lately on Bank of America Corp (NYSE:BAC) and chipmaker Broadcom Ltd (NASDAQ:AVGO). Here's a quick look at how options traders have been placing their bets on BAC and AVGO stocks. 

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.

MAO Aug 28

Put Buyers Sneaking Up On Bank Of America Stock

Bank of America stock is down 0.7% to trade at $23.60. The security has tacked on just 7% this year, and has spent the past few months trading in the $22-$26 region, with its 200-day moving average containing the most recent pullback. 

In the options pits, traders have been favoring calls on an absolute basis. Specifically, more than 368,882 weekly calls have traded in the past 10 days, compared to 149,723 weekly puts. However, put options have become more popular than usual as of late. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows BAC with a 10-day put/call volume ratio of 0.35, which ranks in the 76th percentile of its annual range.

Today, the Oct. 21 put has been flying off the shelves, with over 20,000 contracts traded. Traders buying to open the put expect BAC to fall back beneath $21 -- territory not charted in 2017 -- by October options expiration.

The good news for BAC options traders is that now is an opportune time to pick up near-term contracts. BAC's Schaeffer's Volatility Index (SVI) of 19% ranks higher than just 7% of all other readings from the past year, implying that near-term options are pricing in relatively low volatility expectations. Furthermore, the equity's Schaeffer's Volatility Scorecard (SVS) sits at an impressively high 94, indicating the stock has tended to exceed option traders' volatility expectations during the past year.

Option Traders Eye Record Highs for AVGO

Broadcom stock is down 0.7% to trade at $243.80, despite an upbeat Barron's take on the Apple supplier (subscription required). What's more, AVGO stock is lower even amid reports that Apple will unveil its new iPhones on Sept. 12. It's been an outstanding year thus far for AVGO, which has tacked on 38% year-to-date and touched a record high of $259.36 last Thursday, just before Broadcom reported earnings. The shares' 80-day moving average has contained pullbacks in 2017.

In the options pits, traders have favored weekly calls on an absolute basis. Specifically, more than 67,550 weekly calls traded in the past 10 days, compared to 37,017 weekly puts. This is reinforced by data from the ISE, CBOE, and PHLX, where AVGO sports a 50-day call/put volume ratio of 2.17, which ranks 4 percentage points from a 52-week high.

Digging deeper, over 17,000 calls have been traded today, on track to rank in the 93rd percentile of its annual range. The weekly 10/6 257.50- and 267.50-strike calls have garnered the most attention, with Trade-Alert pointing to a bull call spread. By establishing the spread, the speculator expects AVGO stock to surmount $257.50 -- and move into record-high territory -- before October options expire.

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