British American Tobacco Stays Hot on Upgrade

BofA-Merril Lynch isn't concerned about regulatory risk for BTI in the US

British American Tobacco PLC (NYSE:BTI) this morning received an upgrade to "buy" from "underperform" from BofA-Merill Lynch, which brushed off regulatory risk for the company in the U.S., saying it doesn't see major risk over the next 12 months. This has BTI shares up 3.9% at $42.28, putting it within striking distance of the 52-week high of $42.59 from March.

The shares have been rallying fast since touching the $34 area back in October, up 17.2% in the past three months. Analysts were split on the tobacco name coming into today, with three handing out "strong buy" recommendations, and three others with "hold" or "sell" ratings.

Options trading is typically very light on an absolute basis for BTI, but recent activity has shown a strong preference for long calls. During the past 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), more than 300 calls were bought to open, compared to 32 puts. Options trading is already hot this morning, with total call volume surpassing the daily average in the first half hour of the session.