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What's behind puts in Bank of America

Chris McKhann (chris.mckhann@optionmonster.com)

Bank of America has jumped to 20-month highs but is seeing a large put trade today.

A trader sold 10,000 April 14 calls for the bid price of $0.28 and bought the same number of the April 10 puts for the ask price of $0.27. The volume in each strike was more than 4 times the previous open interest, so this was a new combination trade.

The trade costs nothing other than margin, and so could be set up by a bearish trader who wants a position that doesn't start to lose unless BAC gains $2 more. It is also very possible that this is a protective collar against long shares.

Overall calls in the name are outpacing puts by more than 3 to 1 so far today. More than 300,000 BAC options have already changed hands today, just outpacing its total daily average.

BAC is up 3 percent to $11.97 this morning. The bank hit a high of $12.15 earlier in the session, as shares are more than twice their price a year ago.

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