We were assigned shares of Bank of America (BAC) last week. It has been struggling recently, but this is a core stock, and we are in it for the long haul. BAC is grossly undervalued and grossly oversold.
Today, I am recommending we sell a call expiring in January to generate income and reduce our cost basis on the position. I chose a near-the-money strike, as I expect the market to drift down in the coming days. In January, we will sell calls further out of the money with a goal of capturing potential appreciation in the underlying shares.
You can enter today’s trade even if you were not in the previous position. Just be sure to purchase 100 shares of the stock first for every call you plan to sell. Also, note that we will be managing and tracking the trade based on the original position.
Current Stock Price: $32.43
Cost Basis: $43.87
Action: Sell to open the BAC Jan Week One (1/6) 33 Call
Current Option Price: $0.49-$0.51
Recommended Limit: Set your initial limit order at $0.50, but adjust as needed to sell a call today
New Cost Basis: $43.37
Expiration: After the close on Friday, Jan. 6
Potential Rate of Return: I am targeting breakeven for this position