By Dmitry Pargamanik
If You Are Bullish On BAC, Here Is A Credit Put Spread, Expiring On Nov 15, To Consider
As you can see from the bottom section of the trade idea card, this strategy involves selling the 15-Nov-24 41.5 put and buying the 15-Nov-24 41.5 put.
Here Are The Highlights Of The Strategy
- Market Price (Credit): 0.15
- Theoretical Value: 0.11
- Theoretical Edge: 12.7%
- Yield Potential: 42.9%
What Needs To Happen?
BAC Needs To Remain Above 41.5
At the time of this writing, BAC was priced at 42.41. To achieve maximum profit from this spread, the stock must maintain a closing price above 41.5 on the option expiration date of November 15, 2024.
How Much Can You Make?
Max Profit of 0.15 Equates To A 42.9% Potential Return
In such a scenario, both puts would expire worthless, and you would retain the full credit received from selling the spread, which amounts to 0.15. When expressed as a percentage of the amount at risk, this put spread has the potential to yield a return of 42.9% (0.15 credit / 0.35 amount at risk).
What Is The Estimated Win Rate Of This Put Spread?
Estimated Win Rate Of 78%
Historical stock behavior implies that this particular put spread has an estimated success rate of 78%, but there is no guarantee or way of knowing BAC's future performance with certainty.
What Is The Risk?
BAC Stock Could Decline
Since this is a bullish strategy, it carries the risk of a stock decline. In this case, the break-even point on the downside is 41.35.
How Much Can It Lose?
Max Loss of $0.35 On A Stock Decline Below $41
If, at the option's expiration, BAC's price drops below the $41 strike, both put options will be in-the-money, causing the spread to be valued at $0.50 .In such a scenario, the max loss would amount to $0.35, assuming no exercise or assignment risks.
In Summary
What Makes This Opportunity Compelling?
This BAC bull put spread, set to expire on Nov 15, 2024, appears to have a theoretical trading edge and has a potential to generate significant returns while limiting risk.
When Should You Consider This BAC Bull Spread?
It is important to remember that the outcome is uncertain and that the strategy is of a bullish outlook. The stock has to stay above 41.5 at expiration to fully pay off.
As always keep in mind that all investments carry risk, and success is never guaranteed.
Don't Let an Opportunity Pass You By!
Find More BAC Credit Put Spread Strategies
And if you want to find more credit put spreads for other stocks, go to the bull put spread screener
Contact Information:
If you have feedback or concerns about the content, please feel free to reach out to us via email at support@marketchameleon.com.
About the Publisher - Marketchameleon.com:
Marketchameleon is a comprehensive financial research and analysis website specializing in stock and options markets. We leverage extensive data, models, and analytics to provide valuable insights into these markets. Our primary goal is to assist traders in identifying potential market developments and assessing potential risks and rewards.
NOTE: Stock and option trading involves risk that may not be suitable for all investors. Examples contained within this report are simulated and may have limitations. Average returns and occurrences are calculated from snapshots of market mid-point prices and were not actually executed, so they do not reflect actual trades, fees, or execution costs. This report is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither Market Chameleon nor any other party makes warranties regarding results from its usage. Past performance does not guarantee future results. Please consult a financial advisor before executing any trades. You can read more about option risks and characteristics at theocc.com.
The information is provided for informational purposes only and should not be construed as investment advice. All stock price information is provided and transmitted as received from independent third-party data sources. The Information should only be used as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments and trading strategies. The Company does not guarantee the accuracy, completeness or timeliness of the Information.
