Bank of America Corp (BAC) will join the bevy of financial names that have already entered the earnings confessional this week, scheduled to report before the open on Wednesday, Jan. 15, and options bulls are swarming the stock in response. In fact, 135,000 calls have already crossed the tape in today’s trading — two times what’s typically seen at this point — compared to 59,000 puts, which are running a little hotter than usual, too. It looks like some buying action may be taking place at the January 2020 35-, 35.50-, and 36-strike calls. At last check, BAC is up 1.3% to trade at $35.52.
This preference for bullish bets isn’t unusual. During the past 10 days 144,863 calls have been traded at the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) compared to 60,083 puts. On the other hand, BAC sports a Schaeffer’s put/call open interest ratio of 1.17, which ranks in the 99th percentile of its annual range, suggesting that short-term option players have rarely been more put heavy during the past 12 months.
In the last two years, the lender has tended to settle higher the day after earnings, which includes a 7.2% pop this time last year. The stock has averaged a next-day swing of 2% during these past eight sessions, and this time around the options pits are pricing in a 4.4% move.
On the charts, BAC has enjoyed a 34.7% year-to-date gain, with its recent climb higher supported by the 30-day moving average. Now, the stock is trading just below its late-December 11-year high of $35.72.
Daily stock chart BAC
This recent high comes amid historically low implied volatility (IV) — a combination that has been bullish for the stock in the past. According to a study from Schaeffer’s Senior Quantitative Analyst Rocky White, there have been six other times in the past five years when BAC stock was trading within 2% of its 52-week high, while its Schaeffer’s Volatility Index (SVI) stood at or below its 20th annual percentile. In BAC’s case, its SVI of of 21% sits lower than all but 13% of readings from the past year.
Further data shows that one month after 83% of these signals, BAC was positive, averaging a 6.63% gain. A similar move would put the security at $37.87 — a region the stock has not touched since late in 2008.