For those who may have missed the article posted in February, I made a short call that BAC looked weak compared to the market, and that is was trending back toward the $15 mark, and maybe was heading even lower. Now, a little more than a month later, the (early) results are in.
Bank of America was in fact weak, and as of Friday’s close of business it currently sits at $15.54, having closed as low as $15.31 recently. Here is the chart of what has taken place since the day I published that article, February 24th 2015:
As you can see a short position taken the next day would have never been out of the money, with the price having trended downward the entire time. Those of you who followed us in should have made a tidy profit already.
Because BAC is sitting right above the support level right now, it is tougher to take a position here except as a small flyer position. I would be interested in shorting BAC lightly through $15, if it manages to break through I think we could see a pretty significant drop.
At this point I am exiting a good portion of my position so I guarantee that my trade was profitable. If it keeps going lower I won’t be surprised, but I am happy to take the money on a significant portion of my options position right now because this trade is at a spot where all profits could just as easily be lost. I’m keeping just enough so if there is a big drop, it will still be a nice little bonus.
We certainly don’t hit every trade right on the money, but it is nice to have a strong hunch be confirmed at times like this. The next time we see something like this in the markets we will let you know. Happy trading!