Bank stocks like Bank of America Corp (NYSE:BAC) are responding with vigor this morning on the newest jobs report, with BAC stock and other financials heading higher early Friday.
This morning’s nonfarm payrolls delivered a solid showing, and stocks across the board are getting uppity in premarket trading. The better-than-expected job growth all but guarantees next week’s Federal Open Market Committee meeting will result in a rate hike.
Of course, strength out of financials is nothing new. Ever since the election, the entire space has been on fire. Elevated inflation expectations, rate hikes and the rollback of regulations has created quite the bullish brew for the banking sector.
BofA shares are up just shy of 50% since the election. It has been an accumulation onslaught for the ages. High-volume up days pockmark the landscape like trash littering a neglected highway.
The uptrend in BAC stock stands as a beacon, beckoning to bulls on the street in search of a safe place to park their dough.
Bank of America’s ascent is backed by the triple threat of rising 20-day, 50-day, and 200-day moving averages. And, if you pressed me on it, I could whip out a legion of indicators confirming BAC’s bullish momentum.
On the implied volatility front, fear has left the building. Like the lion’s share of its peers, BofA boasts a low IV rank (15%) which means its options can be scooped up on the cheap.
An Easy Trade on BAC Stock
There’s no need to get overly fancy in your bid for BofA profits. Consider a call spread purchase to capitalize on its continued ascent.
Buy the May $25 call while selling the May $28 call.
You can purchase the $3-wide vertical spread for $1.15. The max loss is capped at the initial $1.25 cost and will be lost if BAC stock sits below $25 at expiration. The max gain is limited to the distance between strikes minus the cost, or $1.85, and will be captured if the stock rises above $28 by expiration.
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As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.