Bank of America Earnings Trade Ideas
- Posted by Greg Harmon
- on April 16th, 2013
Bank of America, $BAC, reports earnings for the Quarter in the morning and has just completed a bearish Crab at 12. Since then it has been bouncing around 11.75 in an expanding wedge. These often are reversal signals. But notice that this time it made a higher low. The 50 day Simple Moving Average (SMA) is starting to drift higher and providing support with the Relative Strength Index (RSI) is oscillating around the mid line and the Moving Average Convergence Divergence (MACD) indicator signal line moving lower. A neutral bias short term in the uptrend with the price flat and indicators going in different directions, and
could be at support. Support lower comes at 11.75 and 11.10 followed by 10.50 and 10. There is resistance above at 12.40 and 13 near the top of the wedge. A break above the wedge would be bullish with a target of 15.30. The reaction to the last 6 earnings reports has been a move of about 3.90% on average or $0.48 making for an expected range of 11.65 to 12.65. The at-the money April Straddles suggest a similar $0.44-$0.50 move by Expiry with Implied Volatility at 46% well above next week at 33% and the May at 30%. Open Interest (OI) for Friday favors a pin at 12, perhaps a bit above, with next week OI showing some upside.
Trade Idea 1: Buy the April 26 weekly 12/12.50 Call Spread for $0.23.
Trade Idea 2: Buy the April 26 weekly 12/12.5/13 Call Butterfly for $0.14.
Trade Idea 3: Sell the April 19 weekly 12.50 Call and buy the May 3 weekly 13 Call for free.
Trade Idea 4: Buy the April 26 weekly/May 17 Expiry 13 Call Calendar for 10 cents.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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