Bank of America (BAC) PriceWatch Alert for October 26, 2009

Posted: Monday, October 26, 2009 8:36 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) ended the last trading session at $16.22. So far the stock has hit a 52-week low of $2.53 and 52-week high of $28.59. Bank of America stock has been showing support around 15.73 and resistance in the 16.91 range. Technical indicators for the stock are Bearish 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 a May '10 15 covered call (BYO EO) for a net debit in the $13.36 area. That is also the break even stock price for this trade. This covered call has a 208 day duration, provides 17.63% downside protection and a 12.28% assigned return rate for a 21.54% 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 7.50 Call (VBA AQ) and selling the May '10 15 call (BYO EO) for a $6.34 debit. The trade has a 208 day life and would provide 14.67% downside protection and an 18.30% assigned return rate for a 32.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.24%. [ABR-Seven Summits Research]