The banking sector appears to have put in a bottom and is gaining upward momentum. I am recommending we roll our Bank of America (BAC) call out two weeks to generate more cash and reduce our cost basis on the position. We are also moving up the strike to capture more potential appreciation.
General Motors (GM) is bouncing back after getting slammed Wednesday following the release of the company’s second-quarter earnings report. Earnings fell short of analyst expectations due in part to warranty recall costs.
I think the sell-off was an overreaction. The automaker also reported a record operating profit and raised its full-year guidance.
I plan to cover GM’s earnings report in more detail in Monday’s OIB Weekly Update. For now, I am recommending we roll our call out one week and to a lower strike to generate more income.
BAC Aug Week One (8/6) 39 Call
Current Stock Price: $38.95
Cost Basis: $41.55
Action:
- Buy to close the BAC Aug Week One (8/6) 39 Call for around $0.24
- Sell to open the BAC Aug Monthly (8/20) 39.50 Call for around $0.54
- Set your initial credit limit at $0.30 but adjust as needed to roll today
New Cost Basis: $41.25
Expiration: After the close on Friday, Aug. 20
Potential Rate of Return: I am targeting breakeven for this position
GM Aug Week One (8/6) 58 Call
Current Stock Price: $54.67
Cost Basis: $57.43
Action:
- Buy to close the GM Aug Week One (8/6) 58 Call for around $0.09
- Sell to open the GM Aug Week Two (8/13) 55 Call for around $0.88
- Set your initial credit limit at $0.79 but adjust as needed to roll today
New Cost Basis: $56.64
Expiration: After the close on Friday, Aug. 13
Potential Rate of Return: I am targeting breakeven for this position