Bank of America (BAC) 3/11/10 PriceWatch Alert Up To 12.92% Downside Protection

Posted: Thursday, March 11, 2010 8:30 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) closed yesterday at $17.11. So far the stock has hit a 52-week low of $4.51 and 52-week high of $19.10. Bank of America stock has been showing support around 16.78 and resistance in the 17.52 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 $14.90 area. That is also the break even stock price for this trade. This covered call has a 163 day duration, provides 12.92% downside protection and a 7.38% assigned return rate for a 16.53% 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 $5.29 debit. The trade has a 163 day life and would provide 10.64% downside protection and a 13.42% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.24%. [THA-Seven Summits Research]