Shares of financial giant Bank of America (BAC) are down 10 percent over the past year. One trader sees the potential for the stock to continue its recent rally into 2023.
That’s based on the February $43 calls. With 182 days until expiration, 3,632 contracts traded compared to a prior open interest of 138, for a 26-fold rise in volume on the trade. The buyer of the calls paid $0.83 to make the bullish bet.
Shares recently traded around $36.50, so the stock would need to rise about 18 percent for the option to move in-the-money.
The bank has seen a 33 percent drop in earnings in the past year, largely as merger and acquisition activity, as well as trading profits, have slowed down. However, overall revenue is just down 4 percent, and the bank is well positioned among its peers for further growth as the economy recovers.
Action to take: Investors could consider shares at these prices. The stock currently yields 2.4 percent, and the bank has done a fair job of raising that payout annually over the past few years.
For traders, the calls are an inexpensive way to bet on a move higher in shares in the next 5 months. The options can potentially deliver mid-to-high double-digit gains. And in today’s volatile markets, they can potentially be sold for a profit well before expiration.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.