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Bank of America Corp. (NYSE:BAC) – Shares in Bank of America are up 2.9% this morning at $9.09, extending gains sparked by the release of results from the latest round of stress tests. But, will this rally continue? Options trading in the newly issued weekly options on BAC suggest some traders believe the stock may have more room to run. Bullish activity in calls set to expire one week from tomorrow is heaviest at the Mar. ’23 $9.0 strike where more than 5,000 in-the-money calls changed hands. It looks like most of these options were purchased for an average premium of $0.21 apiece. Meanwhile, traders speculating the shares could rally to their highest since August 1, 2011, were willing to plunk down an average of $0.03 per contract for some 1,800 calls at the Mar. ’23 $10 strike in the first half of the session. Investors long the $10 calls make money at expiration next Friday as long as Bank of America’s shares add another 10.3% to top the average breakeven price of $10.03. Finally, mixed trading in the Mar. $9.0 strike put options suggests some participants are positioning for shares to cool in the near term. More than 9,000 $9.0 strike puts traded in the first 90 minutes of the session, with roughly 5,500 of those contracts purchased for an average premium of $0.23 apiece. Overall options volume on the bank is nearing 390,000 contracts as of 11:40 a.m. ET.

Technology Select Sector SPDR (NYSEARCA:XLK) – A large ratio put spread initiated on the XLK this morning may be one trader’s way to hedge any potential pullback that could potentially hit the tech sector during the next five weeks to April expiration. Shares in the XLK, which are already up roughly 18.0% year-to-date, rose 0.30% this morning to $30.00 in the first half of the session. It looks like one options player picked up 20,000 puts at the April $30 strike for a premium of $0.67 each, and sold 40,000 puts at the lower April $27 strike at a premium of $0.10 apiece. Net premium paid to initiate the spread amounts to $0.47 per contract. Perhaps a hedge to protect a long position in the underlying, the position yields downside protection in the event that shares in the XLK decline 1.6% to breach the effective breakeven price of $29.53. Alternatively, if the strategist holds no underlying position in the fund, the spread could yield maximum potential profits of $2.53 per contract should shares in the XLK drop 10.0% to settle at $27.00 at expiration next month. The largest holding in the ETF, Apple, Inc., makes up nearly one-fifth of the total fund. Perhaps the spread is a way to hedge against any reverse in AAPL’s shares, which briefly topped $600.00 this morning, through April expiration.

Ross Stores, Inc. (NASDAQ:ROST) – Shares in the off-price retailer of apparel and home accessories fell as much as 3.3% to $54.71 this morning after reporting fourth-quarter earnings ahead of the open. The stock staged a mid-morning recovery rally, however, even turning positive for a short time at midday, to trade 0.50% lower on the session at $56.30 as of 12:35 p.m. in New York. The dismal start for Ross shares on Thursday sparked bearish put buying on the name straight out of the gate. One strategist positioning for the price of the underlying to extend losses in the next couple of months snapped up 832 puts at the May $48.75 strike for a premium of $0.55 each. The put buyer may profit at expiration should shares in Ross Stores plunge 14.4% to breach the effective breakeven price of $48.20. ROST’s shares last traded below $48.20 back in December.

Source: Thursday Options Briefs: BAC, XLK, ROST