Bank of America is scheduled to release its third-quarter financial results on Wednesday, and derivatives traders appear to be positioning for a notable upside move in the stock. According to options market data, the heaviest concentration of call open interest sits at the $57 strike, a level that would represent roughly a 5% advance from the current share price.
The stock has been under pressure over the past two months, tracking the broader weakness across the U.S. banking sector. After reaching a peak of $65.07 in August, shares retreated to $54.58. That pullback now faces a critical test as the lender prepares to update investors on its performance.
What analysts expect from the quarter
Analysts surveyed by Yahoo Finance project that Bank of America's third-quarter revenue rose 8.7% year over year to $30.54 billion. Earnings per share are expected to come in at $1.10, a modest increase from the $1.06 reported in the same period a year earlier.
The second-largest bank in the world has benefited through much of the year from elevated interest rates and strength in its investment banking operations. More recently, however, both drivers have shown signs of strain. High borrowing costs have weighed on investment banking activity, and trading volumes have softened somewhat.
In the prior quarter, Bank of America posted revenue of $31.6 billion, up 15% year over year. The consumer banking division generated more than $11.3 billion and contributed over $3.3 billion in net income. The global wealth and investment management unit brought in more than $6.9 billion, a 16% increase from a year earlier, supported by higher asset management fees and rising market valuations. The global banking and markets divisions added modest revenue.
Investment banking momentum cools
Data compiled by Dealogic shows Bank of America's investment banking division has generated $5.5 billion this year, ranking fourth behind JPMorgan, Goldman Sachs, and Morgan Stanley. Analysts anticipate that investment banking revenue declined in the third quarter, reflecting a broader slowdown in dealmaking and capital markets activity.
Options traders are not expecting an outsized reaction to the results. The put/call ratio stands at 0.27, indicating that call contracts significantly outnumber puts. The $57 strike holds the largest call volume at 9,366 contracts, with open interest of 19,829. Such positioning suggests traders see a path higher but are not bracing for extreme volatility.
That expectation aligns with the stock's recent post-earnings behavior. Shares moved less than 3% following the July report and declined roughly 3% after the prior release, indicating a pattern of muted single-day moves.
Technical picture shows signs of stabilization
On the weekly chart, Bank of America shares have formed a small hammer candlestick, characterized by a compact body and a long lower shadow. The stock has also retraced to the 23.6% Fibonacci level and climbed back above its 50-week moving average. Those signals suggest the recent selloff may be losing momentum, with the psychological $60 mark emerging as a potential upside target if buyers regain control.
Investors will be watching whether the bank can sustain revenue growth in its consumer and wealth management businesses while navigating softer investment banking conditions. The options market's $57 target implies a measured rebound rather than a dramatic breakout, leaving room for the actual results to surprise in either direction.
This article is for informational purposes only and does not constitute financial advice.
