Bank of America (BAC) 11/6/09 PriceWatch Alert Targets 20.94% Return

Posted: Friday, November 06, 2009 8:02 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) closed yesterday at $15.13. So far the stock has hit a 52-week low of $2.53 and 52-week high of $22.31. Bank of America stock has been showing support around 14.56 and resistance in the 15.44 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 13 covered call (BYO EM) for a net debit in the $11.68 area. That is also the break even stock price for this trade. This covered call has a 197 day duration, provides 22.80% downside protection and an 11.30% assigned return rate for a 20.94% 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 13 call (BYO EM) for a $6.95 debit. The trade has a 197 day life and would provide 21.02% downside protection and a 15.11% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.27%. [FBB-Seven Summits Research]