BAC Covered Call

June 2, 2023
Against BAC Stock Position, Sell the July 31 Call (exp. 7/21)

Today the hot growth stocks are slowing down their momentum and money is moving into the stocks/sectors that have largely chopped around for months. While it’s possible this could be the start of a real rotation, let’s take advantage of today’s strength to sell new calls against our CLF and BAC stock positions.

To execute these trades, you need to:
Against BAC Stock
Sell to Open July 31 Call

For every 100 shares of CLF and BAC you own, you can sell 1 call. For every 200 shares of each stock you own, you can sell 2 calls.

The prices you should be able to get on these call sales are $0.60 on the CLF sale and $0.40 on the BAC call (approximately).

April 17, 2023
Roll Position: Against BAC Stock, Buy back the April 36 Call, and Sell the May 32 Call (exp. 5/19).

Bank of America (BAC) will report earnings tomorrow morning before the open. Headed into the announcement, we are holding a BAC stock position and are short the April 36 call that is now worth $0.02. Let’s buy back that April call, so that we can then sell the May 32 call.

To execute this trade you need to:
Buy to Close the April 36 Call
Sell to Open the May 32 Call

Today’s adjustment will be a mistake if BAC explodes well above 32 tomorrow on earnings. However, given the uncertainty around the banks, I think it makes the best sense risk/reward-wise to again lower our cost basis on our position.

Below is what the options market is pricing in for the earnings announcement:

BAC - With the stock trading at 29.5, the options market is pricing in a move of $1.50 this week, or 28 to the downside and 31 to the upside.
Open interest is skewed slightly bullish on a ratio of 1.1:1 call vs. put.
Skew is pricing in typical downside risk and upside interest.

March 1, 2023
Roll Existing Position: Against BAC Stock, Buy Back the March 36 Call, and Sell the April 36 Call (exp. 4/21/2023)

BAC, like many of its financial peers, looks “ok.” What I mean is these stocks have given up some ground in the last two weeks as the indexes have pulled back, though are hardly dying.

This decline in BAC stock has hit the March 36 call that we sold for $0.60 hard, as we can now buy back that call for $0.10 (approximately). Let’s buy back that call for a $0.50 profit, and then sell the April 36 call for $0.60 (approximately).

To execute this trade you need to:
Buy to Close the March 36 Call
Sell to Open the April 36 Call

Please note, if you do not currently have a BAC position, but would like to participate in the April covered call, I have no issue with that situation. And if that is the case, you would:
Buy BAC Stock
Sell to Open BAC April 36 Call

February 16, 2023
Roll Position: Against BAC Stock, Buy Back the February 36 Call, and Sell the March 36 Call (exp. 3/17).

With just two and a half days until February expiration, and ahead of a long holiday weekend, I want to buy back the BAC February 36 call that we sold for $0.44, for $0.07 (approximately), and then sell the March 36 call for $0.58 (approximately).

To execute this trade you need to:
Buy to Close the February 36 call
Sell to Open the March 36 call

Please note, it is likely, though no guarantee, that we will collect the $0.22 BAC dividend in early March.

December 20, 2022
Adjust Existing Position: Against BAC Stock, Sell the February 36 Call (exp. 2/17/2023)

Last Friday our short calls in BAC and CCJ expired worthless. Today, we are going to sell new calls in order to collect additional premiums and to again lower our cost basis.

To execute these trades you need to:

Against BAC Stock

Sell to Open the February 36 Call

The reason I am stretching the BAC trade to February is the company will report earnings in the January expiration cycle.

Finally, collecting approximately $0.47 on the BAC sale, and approximately $0.27 on the CCJ trade, is not going to allow us to retire tomorrow. However, these are nice “dividends” we will collect while waiting for market conditions to improve.

November 17, 2022
Covered Call: Buy Bank of America (BAC) Stock, and Sell the December 37 Call (exp. 12/16)

Ahead of the volatility smash next week for the Thanksgiving holiday (I will write more about this in the Monday morning Weekly Update), today I want to add another short volatility trade to the portfolio via leading financial Bank of America (BAC), which will replace our Macy’s (M) trade, that will likely expire for full profits tomorrow.

To execute this trade you need to:
Buy BAC Stock
Sell to Open December 37 Call

For every 100 shares of BAC stock you purchase, you can sell 1 call. For every 200 shares bought, you can sell 2 calls. And so on …

For example, you can buy BAC stock for 37.1, and sell the December 37 call for $1.20 (approximately).

The most you can make on this trade is $110, plus collect the $22 dividend, per covered call, should the stock close above 37 on December expiration.

The breakeven is at 35.68.