Shares of Bank of America (BAC) have been dropping along with the rest of the market over the past few weeks. One trader sees the possibility of a rebound by the summer.
That’s based on the August $44 calls. With 174 days until expiration, 2,260 contracts traded compared to an open interest of 120, for a 19-fold rise in volume. The buyer of the calls paid $4.28 to make the trade.
Shares of the bank last traded around $45, making this option a slightly in-the-money trade.
The bank has risen about 27 percent in the past year, beating the S&P 500 by about 15 points. Revenue and earnings growth have risen by double-digits, and the bank has a high profit margin of 34 percent.
Action to take: The bank is well run among the major players, and well-priced at just 14 times forward earnings. Investors can lock in a 1.8 percent starting dividend here, with a likelihood of growth in the years ahead.
For traders, the August calls may get a bit cheaper in the next few days, but with so much negative news piling on, a relief rally could send them far higher. Traders who stick with the trade over the coming weeks can likely see the option move higher to a mid-to-high double-digit profit.
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.