BAC has been a stock for traders and investors alike in 2012. The stock has appreciated 75% ytd, it is still down massively from the 2008 highs in the high $40s. To be fair it will take a bubble that equals the tech bubble of the late 90s and the real estate and commodity bubbles of the last decade to have this stock reach those heights again. The 5 yr chart, even with this years rally looks depressed and the $10 resistance level is clearly what traders are shooting at on the upside.
On a near term basis, I think there is a decent chance the stock could consolidate back towards the $9 level that it was trading at just last week, and if the “fiscal cliff” debate goes down to the wire, financials stocks with big gains will be in investors sights.
Looking at the one year chart, the stock is making it’s third attempt at the $10 level in so many months…..I like playing for a move back below the uptrend line, possibly as low as the 200 day moving avg at about 8.35 in the next 2 months.
TRADE: BAC (9.72) Bought the Jan 9/7.5 1×2 Put Spread for .14
-Bought 1 Jan13 9 Put for .24
-Sold 2 Jan13 7.5 Puts for a total of .10 or .05 each
Break-Even On Jan13 Expiration
-Profits btwn 8.86 and 7.50 of up to 1.36, profit trails off btwn 7.50 and 6.14
-Losses of of up to .14 btwn 6 and 6.14 and btwn 8.86 and 9, loss of .14 above 9 and losses below 6.14.
Trade Rationale: this is a low premium way to play for the potential unrest surrounding a protracted “fiscal cliff” debate in a stock where anyone who bought the stock up to a year ago may want to avoid paying capital gains taxes that could go up 2-3x current levels of 10-15%.
-I WOULD NOT BE OUTRIGHT SHORT THE STOCK HERE, IF THERE IS A SUSTAINED RALLY ON A BIG COMPROMISE, RISING TIDES COULD LIFT ALL BOATS AND ON A LONGER TERM TECHNICAL BASIS, BAC COULD POP ABOVE $10 IN A HEARTBEAT.