Bank of America(BAC) – Long-term Bank of America bulls are out
in full force today, scooping up call options like they're going out of
style. BAC's shares are off slightly by less than 1% to $16.19.
Plain-vanilla call buying in the January 2011 contract indicates
investors expect shares to surge over the next 13 months. A large chunk
of 50,000 calls were picked up at the January 25 strike for an average
premium of 86 cents apiece. Shares must rally 60% from the current
price to breach the $25.86 break-even point on the trade. Twice as many
calls were coveted at the higher January 30 strike where 100,000 calls
were purchased for 45 cents each. The investor responsible for the
massive position breaks even if shares jump 88% to $30.45 by
expiration. Finally, another BAC-optimist established a ratio call
spread in the same contract. The investor purchased 20,000 calls at the
January 20 strike for 1.95 apiece, spread against the sale of 40,000
calls at the higher January 30 strike for 46 cents premium each. The
net cost of the spread amounts to 1.03 per contract and positions the
trader to profit if shares exceed $21.03 by expiration in January of
2011. Maximum potential profits available on the transaction amount to
8.97 per contract. Option implied volatility on Bank of America is
currently 38.65% – a scant 2.93% above the 52-week volatility low of
35.77% – attained back on October 20, 2009.
eBay, Inc. (EBAY) – The online marketplace attracted bullish investors to the January 2010 contract this afternoon. EBAY's shares gained 0.5% during the session to arrive at the current price of $23.56. Traders paid an average of 11 cents per contract to purchase 5,500 calls at the January 27.5 strike price. Optimism spread to the higher January 29 strike where about 10,500 calls were picked up for 5 pennies apiece. Longer-term bullish sentiment appeared at the April 30 strike where traders bought 1,500 calls for 26 cents premium apiece. Option implied volatility dipped lower today to 28.24% from yesterday's closing value of 29.07%.
Health Care Select Sector SPDR (XLV) – Investors scrambled for March 2010 contract call options on the Health Care SPDR today. Shares of the XLV moved up 0.75% during the session to $30.91. Traders expecting shares to rally over the next four months purchased approximately 50,000 calls at the March 32 strike for an average premium of 65 cents apiece. Investors long the call options realize profits if shares of the fund jump 5.5% to surpass the breakeven price of $32.65 by expiration in March.
SPDR Gold Trust ETF (GLD) – Shares of the gold exchange-traded fund are up 0.5% to $114.72 with 10 minutes remaining in the trading day. A bullish risk reversal in the January 2010 contract suggests shares of the GLD will likely edge higher over the next two months.
