BAC - Bank of America Corp. – One massive options transaction on Bank of America today suggests one investor has made a bee-line for the hills. The trader observed ducking for cover appears to be expecting the recent rebound in the price of the financial firm’s shares to come to an abrupt end ahead of September expiration. Shares in BAC climbed 2.1% during the session to pin down an intraday high of $13.49. It looks like the options player sold shares of the underlying stock for approximately $13.35 each and purchased 100,000 calls at the September $14 strike for premium of $0.10 apiece. The trader, who is now short the stock and effectively long a stop loss, seems to be anticipating shares will falter ahead of expiration. Near-term pessimism by one trader was countered by longer-term bullish activity on BAC in the January 2011 contract where it looks like another investor put on a three-legged bullish combination strategy. The options optimist sold 10,000 puts at the January 2011 $12.5 strike at a premium of $0.84 each, purchased 10,000 calls at the January 2011 $14 strike for premium of $1.00 apiece, and sold 10,000 calls at the higher January 2011 $17.5 strike at a premium of $0.16 a-pop. The transaction nets out to $0.00 and positions the trader to make money if shares of the financial services firm rally above $14.00 by expiration day. Maximum potential profits of $3.50 per contract are secure in the trader’s piggy bank if the bank’s shares jump 29.7% to trade above $17.50 by expiration day in January. We note that open interest at each of the strikes described is sufficient to cover each of the three legs of the transaction. Therefore, it is possible that the seemingly bullish trade represents a closing transaction instead.

XRT - SPDR S&P Retail ETF – Options on the retail ETF were some of the most actively traded during the current session. The majority of the 171,000 contracts exchanged on the fund as of 2:50 pm ET were September contract puts and calls, but there were some longer-term positions established today, as well. Shares of the XRT, an exchange-traded fund designed to replicate the performance of the S&P Retail Select Industry Index, earlier rallied as much as 1.35% to an intraday high of $38.71. One big options player hoping to see the XRT’s shares increase substantially by December expiration initiated a large-volume debit call spread this afternoon. The investor appears to have purchased 20,000 calls at the December $41 strike for a premium of $1.25 each, and sold the same number of calls at the higher December $45 strike at a premium of $0.27 apiece. The net cost of the transaction amounts to $0.98 per contract. Thus, the call-spreader is positioned to make money if shares of the fund add 8.45% to today’s high of $38.71 to surpass the effective breakeven price of $41.98 by expiration day in the final month of 2010. Maximum potential profits of $3.02 per contract are available to the retail-bull should the XRT’s shares jump 16.25% in the next several months to trade above $45.00 by December expiration.

ZMH - Zimmer Holdings, Inc. – Shares of the manufacturer of orthopedic reconstructive implants, dental and spinal implants, trauma products and related surgical products popped up on our ‘hot by options volume’ market scanner today due to contrarian trading activity in January 2011 contract call options. Zimmer’s shares earlier fell 1.5% to an intraday low of $48.27 before improving late in the session to stand 0.6% lower on the day at $48.70 as of 3:30 pm ET. ZMH was rated new ‘market perform’ at Oppenheimer & Co. today. Despite the decline in the price of the underlying shares, one options trader took a bullish stance on the stock by purchasing approximately 8,300 calls at the January 2011 $55 strike for an average premium of $1.15 apiece. The investor is poised to profit should Zimmer Holdings’ shares jump 15.3% over the current price of $48.70 to rally above the average breakeven price of $56.15 ahead of expiration day. ZMH’s shares last traded above $56.15 back on July 16, 2010.

GMCR - Green Mountain Coffee Roasters, Inc. – News the specialty coffee company plans to increase the price of its single-serving coffee packs, known as K-Cups, by 10% to 15% starting October 11, 2010, fueled an 8.75% rally in the firm’s shares price to an intraday high of $33.94. Green Mountain cited mounting green coffee prices and other short-term cost increases as impetus for its decision to charge more for K-Cups. Investors expecting the coffee maker’s shares to continue higher ahead of September expiration looked to the September $33.33 strike where at least 2,000 now in-the-money calls were picked up at an average premium of $0.74 apiece. Call buyers make money if GMCR’s shares trade above the average breakeven price of $34.07 by September expiration day. Bullish sentiment spread to the higher September $35 strike where traders purchased approximately 1,400 call options for an average premium of $0.29 a-pop. Investors long the calls stand ready to profit if Green Mountain’s shares surge 4.00% over today’s high of $33.94 to exceed the average breakeven point at $35.29 by expiration this month.