Bank of America (BAC) PriceWatch Alert With $7.93 Break Even

Posted: Wednesday, June 24, 2009 8:07 AM EDT

Bank of America (NYSE: BAC) closed yesterday at $12.23. So far the stock has hit a 52-week low of $2.53 and 52-week high of $39.50. Bank of America stock has been showing support around 11.69 and resistance in the 12.71 range. Technical indicators for the stock are Bullish and S&P gives BAC a neutral 3 STAR (out of 5) hold rating. BAC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Feb '10 9 covered call (BYO BI) for a net debit in the $7.93 area. That is also the break even stock price for this trade. This covered call has a 241 day duration, provides 35.16% downside protection and a 13.49% assigned return rate for a 20.44% 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 7.50 Call (BYO AU) and selling the Feb '10 9 call (BYO BI) for a $1.10 debit. The trade has a 241 day life and would provide 29.68% downside protection and a 36.36% assigned return rate for a 55.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.30%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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