Bank of America Earnings Trade Ideas

• Posted by Greg Harmon
• on July 16th, 2013

Bank of America, $BAC, reports before the open Wednesday.

Bank of America, $BAC

It is pausing at resistance at 14 into the report after a series of higher highs and higher lows. The Relative Strength Index (RSI) is flattening in bullish territory with the Moving Average Convergence Divergence (MACD) indicator moving higher, giving an upside bias. Support comes lower at 13.50 followed by 13 and 12.80 before 12.50 and 12.20. The reaction to the last 6 earnings reports has been a move of about 2.98% on average or $0.42 making for an expected range of 13.45 to 14.35. The at-the money July Straddles suggest a slightly larger $0.50 move by Expiry with Implied Volatility at 47% above next week at 33% and the August at 26%. Options are very active in this name with the biggest trades today 38k August 13 Puts on the offer, an August 14/15 Strangle and selling a August 13 Put 10,000 times, a large February 12/11 Put Spread sale over 8000 times, large buyers of upside Calls in July and August. Hmmm.

Trade Idea 1: Buy the August 14/ July26w 14.5 Call Diagonal Spread for a $0.25.

Trade Idea 2: Buy the August 13/15 bullish Risk Reversal for a $0.02 credit.

Trade Idea 3: Buy the July26 13.5/August 13 Put Diagonal for $0.04.

Trade Idea 4: Buy the Stock (13.92) and collar with a long July 26 13.5 Put and short September 15 Call for a $0.04 credit on the collar.

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