We’re only a week into earnings season for the first quarter, and companies are already reporting fantastic numbers.
Bank of America (NYSE:BAC) helped kick things off last week by beating revenue estimates by $960 million and earnings estimates by $0.20 per share — reporting $22.82 billion and $0.86 per share, respectively.
The bank also announced that it was able to release $1.86 billion that it had set aside for potential credit losses because it is experiencing fewer losses due to credit card delinquencies.
This is a great sign that the economy and the bank’s consumer business segment are picking back up.
BAC management also made a couple announcements that bode well for the stock’s long-term prospects.
First, management has authorized a $25 billion share-buyback plan to begin in Q3. This comes on the heels of the Federal Reserve announcing it would be lifting buyback restrictions for banks after June 30.
Second, management broke the record for the largest bank bond sale ever last week by issuing $15 billion in new bonds. This gives the bank a lot of cheap capital to work with to expand its business activities.
We think both of these announcements will keep BAC moving higher in its current uptrend.
To take advantage of this, we recommend selling to open a put write on BAC to collect some option income.
We prefer the May monthly expiration because it gives us plenty of time for the trade to play out.
And we are setting our strike price so that it lines up with the post-earnings support level BAC established on April 15.
On the date of publication, John Jagerson & Wade Hansen did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
John Jagerson & Wade Hansen are just two guys with a passion for helping investors gain confidence — and make bigger profits with options. In just 15 months, John & Wade achieved an amazing feat: 100 straight winners — making money on every single trade. If that sounds like a good strategy, go here to find out how they did it.
