Bank Of America Stock and Yum Stock – Thinking Outside The Box

The news that Bank of America had an $8.5 billion mortgage bond pact approved by a New York State Judge opens the question of whether investors can consider investing in this stock. Bank of America is hoping that this settlement with mortgage-bond investors will end all the liabilities from its faulty mortgages that to date are estimated to have cost Bank Of America $50 billion. Almost all of this was a result of the purchase of Countrywide Financial in 2008 by then CEO Kenneth Lewis. Lewis was determined to press ahead with the purchase of Countrywide despite strong opposition and dozens of analysts who advised against it. Shareholder approval of the purchase though was 69% and the price tag was $4.1 billion.

We all know what happened in the aftermath of the July 1 2008 acquisition of Countrywide Financial. The losses to Bank of America have been staggering and CEO Kenneth Lewis left the company. It is estimated that Countrywide was the top issuer of securities from 2005 to 2007 writing $405 billion of the $3.04 trillion of debt sold. Bank of America on its own issued $76.9 billion. The above information was outlined in a number of articles at Bloomberg.

In 2007 Bank of America stock traded as high as $55.00. We all know what happened in the credit crisis and bear of 2008 to 2009. Bank of America stock fell to a low of $2.53 on Feb 20 2009 and even in December 2011 the stock traded at $4.92.

Good News For Bank Of America Stock?

The past five years has witnessed a lot of volatility in the stock. Bank of America stock fell to $2.53 in Feb 2009 and recovered by April 2010 to $19.86 before plunging again to an intraday low of $4.92 in December 2011. Since then the stock has been in a straight uptrend which reached an intraday high of $17.42 in January 2014. During this period the dividend was cut from 32 cents to 1 cent and has not been increased since. But those investors who bought at the bottom of 2009 and 2011 have done very well. So will this bond pact approval finally get the stock pushing back into the mid to high $20’s? Will this possible settlement finally be the turning point for Bank of America and its stock?

Remembering that this is not a “done-deal” just yet, investors interested in Bank of America might want to consider a different strategy to investing in Bank of America stock.

Bank of America Put Options

As regular readers know I am a big believer in selling put options against stocks I would own. If the stock falls and I am assigned, I am unconcerned simply because it was a stock I would hold in my portfolio until it could be traded for a profit. That said, selling put options without any kind of goal and a plan is not something I would ever recommend. Instead I believe setting goals is important when it comes to investing.

If Bank of America is on the verge of a meaningful and long-term recovery, then it may be worthwhile to consider the stock for my portfolio. There are a number of strategies I would probably consider to enter a stock trade on Bank of America Stock. If my goal was to eventually own 2000 shares of BAC Stock here is a strategy I might consider which is a combination of staggered puts and the walk that profit home to momma strategy.

FullyInformed Members Strategy Article

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