Bank of America Options: Opportunities for Put and Call Investors
Investors in Bank of America Corp (Symbol: BAC) were presented with new options as of today, set to expire on October 17th. With 196 days remaining until expiration, the newly available contracts could offer sellers of puts or calls the chance to earn higher premiums compared to those with nearer expiration dates. Using our YieldBoost formula, Stock Options Channel has analyzed BAC’s options chain for these October contracts, identifying one put and one call contract of particular interest.
Put Contract Insights
The put contract at the $31.00 strike price currently has a bid of 79 cents. If an investor sells to open this put contract, they commit to purchase the stock at $31.00 while collecting the premium, resulting in a cost basis of $30.21 per share (excluding broker commissions). For an investor looking to buy BAC shares, this could present an appealing alternative to purchasing them at the current price of $34.40 each.
This $31.00 strike price offers approximately a 10% discount to BAC’s current trading price, meaning it is out-of-the-money by that percentage. Current analysis indicates a 72% chance that the put contract will expire worthless. Stock Options Channel will continuously monitor these odds, updating a chart on our website under the contract detail page. If the contract does expire worthless, the premium would translate to a 2.55% return on the cash commitment or 4.75% on an annualized basis—a metric we refer to as the YieldBoost.
Below is a chart showing the trailing twelve-month trading history for Bank of America Corp, with the $31.00 strike price highlighted in green:
Call Contract Insights
Shifting to the call options, we find a $37.00 strike price call contract with a current bid of $2.22. If an investor purchases BAC shares at the current price of $34.40 and sells to open this call contract as a “covered call,” they would commit to selling the stock at $37.00. Accounting for the premium collected, this scenario could yield a total return of 14.01%, assuming the stock is called away at the October 17th expiration (excluding any dividends and broker commissions).
It’s important to note that significant upside could be lost if BAC shares rise significantly. Therefore, studying BAC’s trailing twelve-month trading history and its business fundamentals is crucial. Below is a chart reflecting BAC’s trading history, with the $37.00 strike price highlighted in red:
The $37.00 strike price represents about an 8% premium to the stock’s current trading price, indicating it is out-of-the-money by that percentage. Consequently, there’s a 52% chance this covered call contract may expire worthless, allowing the investor to retain both their shares and the premium collected. Continuous monitoring of these odds will be available on Stock Options Channel, including the trading history of the contract. If the covered call expires worthless, the premium collected represents a 6.45% increase to the investor’s returns, or 12.02% on an annualized basis—which we also call the YieldBoost.
For clarity on volatility, the implied volatility for the put contract is at 38%, while the call contract shows an implied volatility of 39%. In contrast, our calculations yield a trailing twelve-month actual volatility of 28%, based on the last 251 trading days and the current share price of $34.40. For additional options contract ideas worth exploring, visit StockOptionsChannel.com.
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also see:
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
