Unusual Options Activity in Bank of America $BAC

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• Hi, My name is Steve and Im with Options Trading
  Research, today were reviewing our recently
  published article

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Unusual Options Activity in Bank of America BAC
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As many of you know, unusual options activity can
be a valuable indicator as to what traders are
thinking, and more importantly, where these
stocks are heading in the short-term.
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This is something professional options traders
pay a lot of attention to, and for good reason
Unusual options activity can tip off big moves
in a stock, either up or down. So lets take a
look at some interesting activity that caught
our eye this week
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Bank of America BAC is one of the worlds
largest banks. The company has a market cap of
just under 200 billion and earns 10 billion a
year in profits. For a good description of the
company, follow the link.
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BAC is trading at 18.07, up 2 for the year.
Thats just 1 below the 52-week high, and 23
from the 52-week low.
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So what does unusual options activity in BAC tell
us?
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The financial sector got hit pretty hard during
the height of the Greek crisis. Banks and other
financial institutions were more exposed than
most other US sectors to Greek/European debt
issues. As such, several financial companies
sold off due entirely to the macro-based news.
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However, most of the major banks like BAC had
very strong fundamentals at the time. They were
being punished by investors for events out of
their control, which may or may not have any
impact on their bottom lines. Typically, this
presents a buying opportunity.
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Heres the deal This week, a trader bought a
large amount of calls on BAC. Keep in mind, a
call option makes money when the underlying stock
goes up.
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Specifically, a trader purchased 49,000 August
18.50 calls for 0.19. The total cash outlay for
the calls was 931,000 which is also the max
loss. Breakeven point for the trade is 18.69.
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Typically a call trade like this, with about a
month until expiration, is a pure bullish bet.
The call buyer is expecting BAC to continue
higher after rebounding from the financial sector
selloff.
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Strong bank earnings have also propelled bank
stocks higher now that the Greece debt crisis is
past (for now). Heres the chart of BAC
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As you can see, BAC found support at the 200-day
moving average (green line) after the Greek
crisis hit its peak. The stock has even blown
through the 50-day moving average with the sector
showing strong signs of improvement.
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Even though BAC is just 1 from its 52-week
highs, the stock would probably have been higher
by now if not for the Greek-induced selloff.
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The financial sector looks to be a good bet
moving forward, and BAC is still attractively
priced. The trader is betting about 1 million
that BAC isnt done moving higher.
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More Options Trading Ideas
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Keep in mind, theres a lot more unusual options
activity going on than what we discuss here. We
just try to bring you what we feel are the most
significant ones and the ones you might actually
be able to make some money on!
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