Shares of megabank Bank of America (BAC) have shed about 13 percent in the past year. One trader sees a potential rebound playing out through the next year.
That’s based on the March 2023 $50 calls. With 290 days left on the option, 12,368 contracts traded compared to a prior open interest of 367, for a 34-fold rise in volume on the trade. The buyer of the calls paid $0.55 to get into the trade.
Shares recently traded for just under $37, so they would need to rise just over $13, or about 35 percent, for the option to move in-the-money. Shares have a 52-week high right at $50.
Revenue has dropped 6 percent in the past year, and earnings have slid about 12 percent, about in-line with the decline in the share price over the last year. The bank now trades at about 10 times forward earnings, and just over book value.
Action to take: Investors may like shares for the long haul, as they’ll likely trend higher with the economy in time. The stock currently yields 2.3 percent, and has a history of raising its dividend.
For traders, the options have a long time to play out, and are relatively inexpensive. So they make for a good long-term bet here. Traders may want to consider buying part of a stake now, and using any short-term decline in shares in the next few weeks to lower their cost basis into the trade.
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.