Posts Tagged ‘Bank of America’

Bank of America (BAC) Option Strategies for Bulls and Bears

Tuesday, December 14th, 2010


Bank of America (NYSE:BAC) has seen mixed reports of late, including rumors of a WikiLeaks exposure. The shares have gained more than 5.5% from Wednesday’s close but are still off more than 15% year to date. Has the stock truly begun to recover or will this be a mere hiccup as part of a longer-term downtrend? And if stock traders want to explore strategic alternatives using options, what can they consider?

For BAC bulls and bears, we have outlined two option strategies below.  These write-ups are educational in nature and should not be regarded as buy or sell recommendations. All prices are as of Tuesday morning, when BAC shares were trading at $12.62, up eight cents on the day. (more…)

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A Bank of America (BAC) Options Trader May Be Expecting Significant Downside

Tuesday, November 16th, 2010

There has been a fair amount of bearish speculation on Bank of America Corporation (NYSE:BAC) lately following the equity’s early-November shot higher.  This unusual burst of strength offered an entry point that may have been attractive for a wide range of bearish traders, from long stock investors looking to hedge against future downside to more speculative traders looking for a significant plunge.

Today’s action seems to be indicative of the latter type of trader. What looks like a far-out-of-the-money long put spread traded shortly after the opening bell. Blocks of 10,000 contracts traded on both the May 5 put and the May 7 put.  Both of these options came into the session with minimal open interest, so it is likely the spread is an opening transaction. (more…)

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Bank of America (BAC) Skeptics Scoop Up Long-Term Puts

Tuesday, November 9th, 2010

Bank of America Long Puts The financial sector has been solidly in recovery mode this year, rising more than 10% collectively compared to the 7% gain in the S&P 500 Index.  Bank of America (NYSE:BAC), however, has not been an active participant until recently.  The shares are down more than 16% in 2010 despite a whopping 10% jump over the past week.

The stock’s recent strength was, in part, driven by a Morgan Stanley analyst who projected short-term growth for the shares. Also in the news was the recent dismissal of a lawsuit against Countrywide, which has been under BAC’s umbrella since 2008.  This lawsuit would have meant more than $350 billion in legal exposure for the banking giant.  Some analysts are now speculating potential bankruptcy proceedings could be in the cards for the Countrywide unit, possibly isolating BAC from damage. (more…)

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Bank of America (NYSE:BAC) Options Players Expecting Volatility

Wednesday, September 22nd, 2010

Bank of America Options Bank of America (NYSE:BAC) may look as though it is headed higher from a late-August bottom, but one options trader isn’t sure if the shares will continue moving higher or will snap back lower. They do appear to expect a dramatic move, however, and seem to have expressed that thesis by scooping up longer-term long straddles.

Shortly after 1:00 p.m. Eastern Time yesterday, a block of 2,000 May 14 calls traded at the same time as 2,000 May 14 puts and the transactions were indeed flagged as a spread. The calls changed hands for $1.55 a piece (the ask price at the time) and the puts traded in the middle of the market for $1.72 per contract. (more…)

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Bank of America (BAC) option trading strategies for bulls and bears

Wednesday, July 14th, 2010

Bank of America (BAC)Brokerage firm Susquehanna issued a slew of new ratings in the financial sector on Tuesday, with “positive/buy” ratings for some and “neutral” ratings for others.  Bank of America (NYSE:BAC) earned a “positive” rating and moved higher on the day (the broad-market rally didn’t hurt matters).  The brokerage said issues within the large-cap banking sector are trading at below-average multiple.  What’s more, the covering analyst believes the impact of FinReg out of Washington has already been priced into the shares.  In other words, it could be a sell the rumor, buy the news situation as investors return to the sector.

Traders who might follow Susquehanna’s thesis could employ a long call as a substitute for buying the shares outright.  For Bank of America skeptics, there are a variety of option strategies that may have lower risk than shorting the stock.  The examples below are hypothetical and should not be interpreted as buy/sell/hold recommendations.  Always consider your risk/reward parameters before placing any new trades. Prices are given as of Tuesday’s close, when BAC was trading at $15.67, up $0.46 (3.0%) on the day.

(more…)

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Cramer calls Bank of America (NYSE:BAC) a buy

Monday, June 14th, 2010

Bank of America (BAC)Jim Cramer, host of CNBC’s lively (and often controversial) Mad Money program, weighed in on Bank of America (NYSE:BAC) late last week. The pundit still calls the stock a solid buy and said that if financial regulation passes, investors won’t be able to “find bank stocks anywhere near where they are” so he encourages people to pull the trigger now.  BAC is set to report earnings on July 16 (expiration Friday) ahead of the opening bell.

BAC shares have dropped more than 20% from their April 15 peak but could be putting in a rounding bottom around the 15 level.  BAC has not traded solidly below 15 since last July, so it may have some support at this region.  Investors who want an alternative to buying the shares outright (spending $1,571 for 100 shares) could consider option strategies, some of which offer reduced risk and enhanced leverage.

Two hypothetical debit-spread strategies on BAC – one bullish, one bearish – are described below.  Remember these serve as examples, not recommendations.  Consider your own risk/reward parameters and personal trading goals before executing any new trades.

Want to learn more about different options strategies or the OptionsHouse trading platform?  Stop by our events page to review our schedule of free weekly webinars and sign up for one that interests you. Tomorrow’s strategy webinar will discuss the short-call strategy.

*Prices given as of Monday morning. BAC was trading at $15.71 (more…)

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August Roundup: A Look at Some Specific Stocks Compared with Major Market Averages

Saturday, August 29th, 2009

With August almost in the books I believe it is worthwhile to look at some specific sectors and stocks relative to the major market averages.

For a reference point the SPX index started the year at a level of 903.25.  So with today’s close at 1028.93 the overall market is up almost 14%.  It is more impressive to remember that on March 9th the index closed at 676.53, after hitting a intra-day low of 666.79 (up 54% from intra-day low)

On the sector front the best performing sector has been Info Tech up almost 40% YTD.

Within the highest weighted Tech companies Apple (AAPL) stands out,  up almost 100% .  Google (GOOG) a more pedestrian 51%.  Microsoft and Intel 27% and 38% respectively.

Also a leading sector the Materials sector has enjoyed just over a 30% YTD return

Freeport McMoran (FCX) a copper and gold company stands 167% higher than the start of the year!

Heavy weight Monsanto (MON) is only better by 18%

Consumer Discretionary names as a sector are up by 23.6% from the start of the year.  This sector as it is driven by consumers has definite winners and losers.  McDonald’s Corporation (MCD) which was a relative bastion of safety in the last quarter of 2008 is actually down9.8% on the year.  This is likely because investors have rotated out of safety into higher beta higher risk names.

Ford (F) is back from the dead, taking the pole position of the top 15 members in this sector up 237%.  Remember this company did not take government money as Chrysler and General Motors (MTLQQ.PK) did.  Amazon (AMZN), up 61%, Target  (TGT) up 37% and Kohls (KSS) up 45%, are three retailers that compare favorably.

The consumer staples sector is higher by only 3% as investors have rotated out of traditional safety stocks.  Proctor Gamble (PG) is down 13% Wal Mart (WMT) is down almost 9% and Coca-Cola (KO) is up only 8%.

Lastly Financials are up 17% for the year.  This sector has had the biggest thrill ride at the lows it was down over 50%, from the lows it is up 143%!

Goldman Sachs (GS) is up 94% to lead the charge

American Experess (AXP) is higher by 84% as the consumer is still using the little green cards.

In the Banking subsector Wells Fargo (WFC) is still down on the year losing 7.3%

Citigroup (C) still has issues down 22%

Bank of America (BAC)  has recovered 27%

And J.P. Morgan Chase (JPM) is up a respectable 36% which is great by most measures, unfortunately they measure vs. Goldman Sachs typically.  So Jamie Dimon is probably disappointed.

The next move in the overall market is anyone’s guess.  The 10 day historical vol is calculated today at 10.79%.  The VIX is stubbornly staying near the 25% level, possibly indicating we are entering a more volatile trading environment into the last 4 months of the year.  The more dispersion between sectors, and between stocks in performance the more “normal” trading will be.

Remember the stock market is the ultimate forward looking indicator of future cash flows and expected growth for the economy and individual companies.

There is no better indicator out there.

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Past Wall Street Transgressions Make Good Headlines, Poor Market Indicators

Tuesday, August 25th, 2009

The top three headlines in the Money and Investing section of the WSJ today are:

Regulators Examine Goldman’s Trade Tips

BofA Denies Misleading Its Investors on Bonuses

Charles Schwab takes on Cuomo

When markets drop as they did in 2008 the public wants villains and the media seems to have an endless supply. Today’s serving of news is a course in “evil” banks and brokers.

What I find interesting is the market’s reaction to these headlines.  The mini S&P 500 futures are actually predicting higher – opening up over half a percent.

This is likely due to the fact that the market is forward-looking, despite the headlines, and the misdeeds of 2008 are in the past. The crowd may still want someone to blame for the losses of last year, but it’s important to remember that last year’s transgressions have very little to do with forward earnings for companies and future prospects for the economy.

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