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Financial Stocks: Why Bank of America May Be Working Its Way to $24 Per Share
From the Buzz & Banter: An update on a trading idea for Goldman Sachs, and how the same strategy could now work for BAC.
Fil Zucchi    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

If you got involved in Goldman Sachs (NYSE:GS) when I highlighted (subscription required) the divergence between the stock and its CDSs, selling some near-dated out-of-the-money calls is probably not going to hurt.

If you didn't get involved and you think you missed the move, there's another very similar setup developing in Bank of America (NYSE:BAC), where its CDSs are making new post-crisis lows on a seemingly daily basis. One of the best analysts focused on relative value trades between single-name credit/credit derivatives and stock prices had a note out this morning suggesting that based on current CDS spreads, BAC should be working its way to about $24/share.

Typically, these are not fast-money-type moves, as the dynamic between CDS and stocks generally takes months to more than a year to unfold. So with that time frame in mind, and having missed his recommendations on Rite Aid (NYSE:RAD) a year ago and iStar Financial (NYSE:STAR) in December, I am now nibbling on BAC and will get longer on pullbacks.

And besides, technically speaking, this latest pennant breakout looks picture-perfect.

Twitter: @FZucchi
Position in BAC,GS
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Financial Stocks: Why Bank of America May Be Working Its Way to $24 Per Share
From the Buzz & Banter: An update on a trading idea for Goldman Sachs, and how the same strategy could now work for BAC.
Fil Zucchi    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

If you got involved in Goldman Sachs (NYSE:GS) when I highlighted (subscription required) the divergence between the stock and its CDSs, selling some near-dated out-of-the-money calls is probably not going to hurt.

If you didn't get involved and you think you missed the move, there's another very similar setup developing in Bank of America (NYSE:BAC), where its CDSs are making new post-crisis lows on a seemingly daily basis. One of the best analysts focused on relative value trades between single-name credit/credit derivatives and stock prices had a note out this morning suggesting that based on current CDS spreads, BAC should be working its way to about $24/share.

Typically, these are not fast-money-type moves, as the dynamic between CDS and stocks generally takes months to more than a year to unfold. So with that time frame in mind, and having missed his recommendations on Rite Aid (NYSE:RAD) a year ago and iStar Financial (NYSE:STAR) in December, I am now nibbling on BAC and will get longer on pullbacks.

And besides, technically speaking, this latest pennant breakout looks picture-perfect.

Twitter: @FZucchi
Position in BAC,GS
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Financial Stocks: Why Bank of America May Be Working Its Way to $24 Per Share
From the Buzz & Banter: An update on a trading idea for Goldman Sachs, and how the same strategy could now work for BAC.
Fil Zucchi    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

If you got involved in Goldman Sachs (NYSE:GS) when I highlighted (subscription required) the divergence between the stock and its CDSs, selling some near-dated out-of-the-money calls is probably not going to hurt.

If you didn't get involved and you think you missed the move, there's another very similar setup developing in Bank of America (NYSE:BAC), where its CDSs are making new post-crisis lows on a seemingly daily basis. One of the best analysts focused on relative value trades between single-name credit/credit derivatives and stock prices had a note out this morning suggesting that based on current CDS spreads, BAC should be working its way to about $24/share.

Typically, these are not fast-money-type moves, as the dynamic between CDS and stocks generally takes months to more than a year to unfold. So with that time frame in mind, and having missed his recommendations on Rite Aid (NYSE:RAD) a year ago and iStar Financial (NYSE:STAR) in December, I am now nibbling on BAC and will get longer on pullbacks.

And besides, technically speaking, this latest pennant breakout looks picture-perfect.

Twitter: @FZucchi
Position in BAC,GS
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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