Market News

December 1, 2016  Thu 7:47 AM CT

Many financial names have risen to levels not seen since the market crash of 2008, but at least one large investor apparently believes that the run isn't over.

Yesterday Bank of America--one of the highest-profile winners in the post-election rally--attracted a highly bullish option strategy that anticipates more gains through early next year. Our systems detected the purchase of 80,000 February 21 calls for $1.03 and the sale of 80,000 February 19 puts sold for $0.40. These are clearly new positions, as volume was well above the open interest in both strikes, and represented the largest trade in the option market yesterday.

This combination trade is especially bullish because a rally would boost the price of the long calls while decreasing the value of the puts that were sold. But the opposite will occur if the stock drops, and the trader will be on the hook to buy shares if they fall below $19 by expiration in mid-February. (See our Education section)

BAC rose 4.5 percent to $21.12 yesterday and is up 25 percent in the last three months. The bank reported mixed results on Oct. 17 and is scheduled to announce its next quarterly numbers before the market opens on Jan. 13.

Overall option volume in the name was twice its daily average yesterday. The large combination strategy is the latest of several bullish option trades in the last month, as shown in the screen shot of our proprietary Activity Log below:

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