Bank of America (BAC) PriceWatch Alert Targets 22.09% Return

Posted: Monday, June 29, 2009 8:07 AM EDT

Bank of America (NYSE: BAC) ended the last trading session at $12.75. 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 12.09 and resistance in the 13.11 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 10 covered call (BYO BJ) for a net debit in the $8.75 area. That is also the break even stock price for this trade. This covered call has a 236 day duration, provides 31.37% downside protection and a 14.29% assigned return rate for a 22.09% 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 2.50 Call (VBA AY) and selling the Feb '10 10 call (BYO BJ) for a $6.35 debit. The trade has a 236 day life and would provide 30.59% downside protection and an 18.11% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.32%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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