Bank of America (BAC) 11/18/09 PriceWatch Alert At $12.67 Break Even

Posted: Wednesday, November 18, 2009 8:47 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) closed yesterday at $15.77. So far the stock has hit a 52-week low of $2.53 and 52-week high of $19.10. Bank of America stock has been showing support around 15.50 and resistance in the 15.96 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 $12.67 area. That is also the break even stock price for this trade. This covered call has an 185 day duration, provides 19.66% downside protection and a 10.50% assigned return rate for a 20.71% 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 14 call (BYO EN) for a $7.85 debit. The trade has an 185 day life and would provide 18.52% downside protection and a 14.65% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.25%. [WBA-Seven Summits Research]