Bank of America Earnings Trade Ideas
- Posted by Greg Harmon
- on October 16th, 2012
Bank of America, $BAC
Bank of America, $BAC, is coming out of a ‘W’ pullback and now building an ascending triangle, tapping resistance at the top at 9.65 as it heads into the earnings report Wednesday morning. With a Relative Strength Index (RSI) that is bullish and a Moving Average Convergence Divergence (MACD) indicator that is about to cross to positive, it has a upward bias. The target on the break out of the triangle higher would be to 10.60. There is resistance higher at 10.05 followed by 10.50 and 11.09. Short interest is elevated at over 15% in the name and could help fuel a move higher. There is support lower at 9.14 and 8.80 followed by 8.35. The reaction to the last 6 earnings reports has been a move of about 3.85% on average or $0.37 making for an expected range of 9.15 to 9.90. The at-the money October Straddles suggest a roughly $0.46 move by Expiry with Implied Volatility at 60% above the historical at 35% but and November at 38%. There is monster options volume today at over 350,000 contracts traded with calls outnumbering puts by about 5:1. Unfortunately the downside puts do not have enough value to sell.
Trade Idea 1: Buy the October 9.5 Call for $0.24.
Trade Idea 2: Buy the October 9.5/10 Call Spread for $0.18.
Trade Idea 3: Buy the October 9.5/10/10.5 Call Butterfly for $0.14.
Buying the October 9.5 and 10.5 Calls and selling 2 October 10 Calls, looking for a move to 10 for maximum payout.
Trade Idea 4: Buy the October/November 10 Call Calendar for $0.18.
Sell the October 10 Call and buy the November 10 Call, looking for a move higher, but not above 10 by Friday.
I like #4 the best for a continued move higher but a struggle to overcome the nearly 300k Open Interest (OI) in the October 10 Call.
Dragonfly Capital Views Anniversary Celebration
For a limited time the Opportunity to join the Dragonfly Capital Views Premium Membership on an Annual basis is available for only $600.
This is 20% off of the standard annual subscription price and nearly 45% off of a rolling monthly membership! Don’t miss this limited opportunity! After October Options Expiration Saturday it reverts back to $750.Sign up here.
Want to learn more about Dragonfly Capital Views?
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- Macro Week in Review/Preview August 22, 2014
- Give it All to Warren Buffett
- I Love US Steel, So I’m Getting Short It
- Only Practice Risk Management Part Time?
- Premium Earnings 8-21-14
- Buying Some Energy
- You’ve Got Mail – Reopening AOL Long or Short
- Premium Earnings 8-20-14
- The Sneaky Dollar Breakout
- 3 Reasons to Buy H&R Block Outside of Tax Season