Bank of America (BAC) 11/5/09 PriceWatch Alert At $10.80 Break Even

Posted: Thursday, November 05, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) closed yesterday at $14.70. So far the stock has hit a 52-week low of $2.53 and 52-week high of $24.35. Bank of America stock has been showing support around 14.33 and resistance in the 15.43 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 $10.80 area. That is also the break even stock price for this trade. This covered call has a 198 day duration, provides 26.53% downside protection and an 11.11% assigned return rate for a 20.48% 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 $6.15 debit. The trade has a 198 day life and would provide 24.15% downside protection and a 13.82% assigned return rate for a 25.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.27%. [THA-Seven Summits Research]