Bank of America (BAC) 11/2/09 PriceWatch Alert Shows Bearish Technicals

Posted: Monday, November 02, 2009 8:07 AM EDT

Bank of America (NYSE: BAC) ended the last trading session at $14.58. 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 13.71 and resistance in the 16.17 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 12 covered call (BYO EL) for a net debit in the $10.73 area. That is also the break even stock price for this trade. This covered call has a 201 day duration, provides 26.41% downside protection and an 11.84% assigned return rate for a 21.49% 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 5 Call (VBA AP) and selling the May '10 12 call (BYO EL) for a $6.10 debit. The trade has a 201 day life and would provide 23.87% downside protection and a 14.75% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.27%. [ABR-Seven Summits Research]

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