Sarah Wasserman (swasserman@sir-inc.com) Bank of America Corporation (BAC) was smacked with a bearish brokerage note from KBW on Thursday. Specifically, the firm cut its outlook on BAC to "market perform" from "outperform," explaining that it does not see significant earnings improvement from the banking issue in 2011.
BAC has not been doing well on the charts lately, either, with the shares falling steadily since April. As a result, BAC is now docked beneath the long-term support of its 10-month and 20-month moving averages, which recently completed a bearish cross.
Option players flocked to BAC on Thursday, with 535,000 contracts crossing the tape -- well above the stock's expected single-session volume of 414,000 contracts. Calls comprised the majority of the volume, with roughly 411,000 contracts traded.
BAC's December 13 call was the day's most popular strike, with 81,713 contracts crossing the tape. Most of these calls crossed at the bid price, suggesting they were likely sold, and open interest jumped by 33,617 contracts overnight. In other words, it appears that traders were adding last-minute short positions at this strike. By writing to open the December 13 call, a trader is ultimately betting that BAC will remain below $13 through the close tonight -- allowing the sold calls to expire worthless so he can pocket the premium received at initiation.
BAC is currently hovering around $12.57.
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