Major financial institution
Bank of America (BAC) is down 15 percent over the past year as rising interest rates have weighed on lending activity. One trader sees a rebound in the coming month.
That’s based on the October $23 calls. With 31 days until expiration, 17,263 contracts traded compared to a prior open interest of 194, for an 89-fold rise in volume on the trade. The buyer of the calls paid $6.00 to make the bullish bet.
The bank last traded just under $29, meaning the options are about $6 in the money and have no time premium. Shares had rallied to the $33 range in July before sliding lower to where they trade today.
Even with the weakness in bank stocks, Bank of America has held up well. Revenues are up 9 percent, and earnings have grown nearly 20 percent in the past year. Plus, shares trade at a 10 percent discount to their book value.
Action to take: Investors may like shares following this recent selloff. BAC shares now yield 3.3 percent, and the bank has grown its dividend in recent years.
For traders, the October calls are already in-the-money, so they should rise with shares in the coming weeks. Traders may want to look to buy an option now, and add in more on any down days in the coming week, given the market’s historic weakness this time of year.
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.