Bank of America (BAC) 3/8/10 PriceWatch Alert Could Hit 18.96% Return

Posted: Monday, March 08, 2010 8:09 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) ended the last trading session at $16.70. So far the stock has hit a 52-week low of $3.00 and 52-week high of $19.10. Bank of America stock has been showing support around 16.33 and resistance in the 16.93 range. Technical indicators for the stock are Bullish and S&P gives BAC a very positive 5 STAR (out of 5) strong buy rating. BAC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Aug '10 16 covered call for a net debit in the $14.73 area. That is also the break even stock price for this trade. This covered call has a 166 day duration, provides 11.80% downside protection and an 8.62% assigned return rate for an 18.96% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the BAC Jan '11 10 Call and selling the Aug '10 16 call for a $5.13 debit. The trade has a 166 day life and would provide 9.40% downside protection and a 16.96% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.24%. [ABR-Seven Summits Research]