Bank of America Calls Pop as Fed Meeting Looms

BAC options are affordably priced at the moment

by Patrick Martin

Published on Dec 2, 2019 at 2:35 PM

In about a week's time, the spotlight will soon shift from retail stocks to the banking sector ahead of next week's Federal Open Market Committee (FOMC) meeting. One name in focus today is Bank of America Corp (NYSE:BAC), with options traders in particular taking a renewed interest in the financial institution. 

More specifically, call options are being traded at double the average intraday amount. Leading the charge are the weekly 12/13 34.50- and 34-strike calls, where new positions are being opened. There's also notable buy-to-open activity at the weekly 12/6 34-strike call, with those traders eyeing more gains for BAC by this Friday when the options expire. 

This appetite for calls runs counter to the recent options trend, though. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) BAC sports a Schaeffer's 10-day put/call volume ratio of 0.65, which ranks in the 85th percentile of its annual range. While the ratio indicates calls outnumber puts on an absolute basis, the lofty ranking shows an unusual preference for puts.

Now is the time to buy premium on Bank of America too, as its Schaeffer's Volatility Index (SVI) of 19% ranks in the 2nd annual percentile, hinting at low volatility expectations at the moment. Plus, BAC's Schaeffer's Volatility Scorecard (SVS) comes in at of 97 out of 100. This means the security has consistently made bigger moves on the charts than its options premiums have priced in over the past year.

Bank of America stock nabbed an 11-year high of $33.74 earlier today, and is fresh off its third straight weekly win. During this climb, the shares' 20-day moving average has emerged as reliable support. 

Daily Stock Chart BAC

 

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