Bank of America (BAC) PriceWatch Alert Down To $34.43 Break Even

Posted on Monday, September 22, 2008 8:07 AM

Bank of America (NYSE: BAC) ended the last trading session at $37.48. So far the stock has hit a 52-week low of $18.44 and 52-week high of $52.96. Bank of America stock has been showing support around 32.04 and resistance in the 42.22 range. Technical indicators for the stock are Bullish and S&P gives BAC a weak 2 STAR (out of 5) sell rating. BAC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '09 37.50 covered call (BAC AU) for a net debit in the $34.43 area. That is also the break even stock price for this trade. This covered call has an 117 day duration, provides 8.14% downside protection and an 8.92% assigned return rate for a 27.82% 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 '10 20 Call (WBA AD) and selling the Jan '09 37.50 call (BAC AU) for a $14.10 debit. The trade has an 117 day life and would provide 9.02% downside protection and a 24.11% assigned return rate for a 75.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 9.41%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]