BAC Analysis

Bank of America Corp. (BAC)

Update 5/15/2017: BAC rose sharply beginning on the 5th trading day after earnings were published, gapping on two consecutive days and rapidly becoming unprofitable. As expiration approached, I exited the position for a $3.10 debit.

Shares rose by 6.6% over 28 days, or a +86% annual rate. The options position produced a -23.6% loss on debit for a -308% annual rate.


BAC publishes earnings on Tuesday before the opening bell.

I shall use the MAY series of options, which trades for the last time 32 days hence, on May 19.

Implied volatility stands at 30%, which is double the VIX, a measure of the volatility of the S&P 500 index.

BAC’s IV stands in the 33rd percentile of its annual range and the 77th percentile of its most recent broad movement.

The price used for analysis was $22.55.

Premium: $0.86 Expire OTM  
BAC – iron condor Strike Odds Delta
Calls
Long 25.00 90.9% 10
Break-even 23.86
Short 23.00 60.4% 43
Puts
Short 22.00 60.8% 36
Break-even 21.14
Long 20.00 87.8 10

The premium is 43% of the width of the position’s wings.

The risk/reward ratio is 1.3:1.

Decision for My Account

I have entered a position on BAC as described above. The stock at the time of entry was priced at $22.60.

By Tim Bovee, Portland, Oregon, April 17, 2017

2 thoughts on “BAC Analysis

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