Targeting Bank of America for More Option Income

We're seeing good signs on the market for BAC

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We are recommending another bullish trade on  Bank of America (NYSE:BAC).

In March, we recommended selling puts on BAC after it broke above resistance at around $29.70, and we think now is a good time to reopen a bullish position on this banking stock.

Despite some issues across some parts of the Treasury yield curve, there are some signs that longer-term interest rates may continue ticking higher this quarter.

That would be great for financial stocks like BAC.

Signs of Higher Yields

The Advance Gross Domestic Product (GDP) report from the Bureau of Economic Analysis came out on Friday and was better than expected.

Although there are some caveats within the data (inventory levels and imports), the numbers still show growth that is better than “potential.” Higher GDP growth rates should lead to an increase in inflation and interest rate expectations.

Higher long-term yields are a good thing for banking stocks because they improve the yield spread — the difference between what capital costs the banks versus the interest they can earn on loans.

The recent surprises from the credit card and payment processing companies further supports a positive outlook for banking on the consumer side, which is a strength for BAC.

New Support at $30

From a technical perspective, we like BAC, even as it pulls back a little following Monday’s breakout. The stock is above short-term support, and we think that new support level — near $30 per share — would make a good strike price for a put write.

Daily Chart of Bank of America (BAC) — Chart Source: TradingView

BAC reported strong earnings this quarter, which may have led to some profit taking immediately after. But now the stock seems to be rising again, and we can take a position with a bullish put write.

To find out which puts we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today. 

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.

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Article printed from InvestorPlace Media, https://investorplace.com/2019/05/targeting-bank-of-america-for-more-option-income/.

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