Bank of America (BAC) 11/19/09 PriceWatch Alert Down To $13.50 Break Even

Posted: Thursday, November 19, 2009 8:09 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) closed yesterday at $16.35. 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 15.69 and resistance in the 16.71 range. Technical indicators for the stock are Bullish 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 15 covered call (BYO EO) for a net debit in the $13.50 area. That is also the break even stock price for this trade. This covered call has an 184 day duration, provides 17.43% downside protection and an 11.11% assigned return rate for a 22.04% 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 15 call (BYO EO) for an $8.70 debit. The trade has an 184 day life and would provide 16.21% downside protection and a 14.94% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.25%. [THA-Seven Summits Research]