Unusual Options Activity: Bank of America (BAC)

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  • Shares of Bank of America (BAC) had a relatively slow day, as other large banks reported their earnings. But at least one trader sees shares heading higher when BAC reports earnings next week.

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  • That’s based on the February 5th $37.50 calls. With share around $33, it would require shares to pop nearly 10 percent to move in-the-money. But the trader paid just 13 cents on average for the trade, so it could be good for a big rally, even if it ends up worthless at expiration.

    The trade, expiring in 18 days, saw over 12,500 contracts trade, an 82-fold rise on volume from the prior open interest of 150 contracts. The bank’s shares are nearly back to their pre-pandemic highs, but a move to $37.50 would represent a multi-year high.

    Action to take: As far as short-term bets go, this one could offer a double. Traders who follow the trade should look for high double-digit returns. Just don’t expect to make a lot buying an option for $0.13, and look to take profits early.

    The bank reports earnings on Tuesday, January 19th, so traders will know very quickly whether this trade will become a big winner, or a big loser. Those betting on the bank long term may want to look at the pricier March $35 calls, trading for about $1.00, instead.

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