On September 9, 2011 we sent a trade alert to members who bought BAC @ 6.99 and sold the Oct11 8 Calls @ 0.37, initiating a Covered Calls position @ 6.62 cost basis using 50% of intended capital. From that point we did a variety of Call and Put selling against the BAC long position.
After several months of reducing the cost basis, we had the Dec 6 short Puts put to us. This utilized the other 50% of our intended capital, making us fully vested in BAC. At that point, we were holding BAC from a cost basis of 5.87. We were already holding Short Calls from 0.29 on the first 50% portion of the BAC position, and sold Short Calls @ 0.15 on the new 50% portion shortly after the shares were put to us. This gave us an average fill of 0.22 on the Jan12 6 Short Calls, further reducing the cost basis from 5.87 to 6.65.
Options markets are pricing in a 91.96% probability that BAC will be trading at or above 6.00 on January options expiration Friday, almost guaranteeing our BAC shares will be called away.
The end result if they are called away? (6.00-5.65)/5.65 = +6.19%! It was a lot of work, but was worth it in the end. 6.19% is not a make or break return, but it’s certainly nothing to laugh at.
We wanted to give you an idea of how trade alerts look when you’re a TickerTank Premier Member. We copied and pasted the entire trade below, including the initial alert, trade analysis video, and all of the updates on the trade to date.