Bank of America (BAC) 10/27/09 PriceWatch Alert With $12.42 Break Even

Posted: Tuesday, October 27, 2009 8:26 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) closed yesterday at $15.40. So far the stock has hit a 52-week low of $2.53 and 52-week high of $24.62. Bank of America stock has been showing support around 14.43 and resistance in the 16.69 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 14 covered call (BYO EN) for a net debit in the $12.42 area. That is also the break even stock price for this trade. This covered call has a 207 day duration, provides 19.35% downside protection and a 12.72% assigned return rate for a 22.43% 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 14 call (BYO EN) for a $5.47 debit. The trade has a 207 day life and would provide 15.78% downside protection and an 18.83% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.24%. [ATU-Seven Summits Research]