The bulls are trying to get back-to-back wins on the Dow for the first time this year as they power their way towards fresh highs overall. Today’s push is being led by Tech and the Financial stocks as better-than-expected results from Bank of America (BAC, $17.17, up $0.40) have given the sector a boost.
Shares of BofA have been surging since the move past $15 in mid-November and we should have reentered the stock on the breakout for our Weekly Wrap. We started recommending covered calls on the stock when shares were at $5 back in 2011.
We have had 8 winning trades over the past few years on BAC for solid double-digit returns as we nearly doubled our money but we didn’t want to chase the stock into earnings although we should have played call options.
The January 17 calls (BAC140118C00017000, $0.26, up $0.10) closed at 16 cents on yesterday’s close and traded to a high of 43 cents this morning. These options expire Friday so it would have been a lottery trade but the returns would have been nearly 170% had the options been closed at the peak.
The February 17 calls (BAC140222C00017000, $0.56, up $0.16) are up 40% and have traded to a high of 70 cents after closing at 40 cents yesterday.
We were selfishly looking for shares to fall back to $15 instead of pulling the trigger on the breakout but we haven’t gotten that chance. We may not as shares will likely make a run past $20 this year. We will do some chart work over the weekend to see if this is still a good entry point for BAC. We can lower our cost by selling options against the position but we want to make sure the premiums are enough to make the trade worthwhile as there are a number of other trades we like a little better.
Tomorrow will be a big day for economic and earnings news and the push to and past resistance today could lead to another possible run to our extended price targets. There could also be a pullback into the trading range if there are disappointments but we are looking for higher highs.
The Dow is higher by 126 points to 16,500 while the S&P 500 is gaining 10 points to 1,849. The Nasdaq is up 29 points to 4,212 and the Russell 2000 is popping a 6-pack and is at 1,169.
Subscribers, check the Members Area for the updates. We have 2 Profit Alerts today, including one trade that has made us 55% in less than 24 hours.