Bank of America (BAC) 11/20/09 PriceWatch Alert Support Down To $15.75

Posted: Friday, November 20, 2009 8:26 AM EDT
By: Market Intelligence Center Staff

Bank of America (NYSE: BAC) closed yesterday at $16.08. 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 15.75 and resistance in the 16.63 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 14 covered call (BYO EN) for a net debit in the $12.73 area. That is also the break even stock price for this trade. This covered call has an 183 day duration, provides 20.83% downside protection and a 9.98% assigned return rate for a 19.90% 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 $7.95 debit. The trade has an 183 day life and would provide 19.47% downside protection and a 13.21% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Bank of America has a current annual dividend yield of 0.25%. [FBB-Seven Summits Research]