Options Trading Journal

My BAC Options Strategy and Trades 2022

Reflecting on my BAC options trades. What I did right. What I did wrong. What I am going to do next.

Reflecting on my BAC options trades. What I did right. What I did wrong. What I am going to do next.

BAC is the symbol for Bank of America. It is one of the largest banks in US. It was mentioned as a good solid stock in a webinar I attended.

Learning to Evaluate BAC

At the beginning of 2022, I attended a course called Options Millionaire Intensive (affiliate link). OMI is a 3-day live / virtual bootcamp. I learnt some interesting investing concepts and strategies. One of them is a checklist for evaluating whether a company is good.

  1. Operating cashflow (OCF) of a good company should be consistently positive. A bonus if it is growing.
  2. Net profit margin should be positive. 10% and more to be considered good.
  3. Interest coverage ratio should be positive. The larger the number the better. Nil is also good. It means the company has no loans.
  4. The current year Price/Earning ratio (PE) should be lower than the 5-yr PE
  5. The current year Earning Per Share (EPS) should be higher than the 5-yr EPS
  6. The Value line should be higher than the current share price. This means that the company shares could be trading at a discount.

Applying the OMI Checklist to BAC

  1. BAC’s operating cashflow is positive until 2021. TTM OCF is (-7,193 mil).
  2. BAC’s net profit margin % was in the 20s for the last 4 years and 34.29 in 2021. A very comfortable margin.
  3. Interest coverage ratio is zero. BAC has no loans.
  4. BAC’s current PE is 11.50 while 5-year PE is 13.90.
  5. The current EPS is $3.57
  6. The value line is 13.90 x 3.57 = $49.62 which is higher than the share price of $42.90.

BAC’s profit margin is healthy and it has no loans. Its share price is slightly below the value line. It’s operating cashflow is a bit concerning though.

Following the instructions of OMI workshop, I sold a put option.

11 Feb 2022 – sold 1 put option with strike price $47.50 expiring 18 Feb 2022 for a premium of $34. Assigned. Profit: $34

I was assigned 100 shares for a cost of $4,750. I collected $34 which means my actual purchase price is ($4,750-$35)/100 = $47.15

My BAC options strategy is the Covered call. Sell call options until the stock gets called away because it is not a stock I want to hold long term.

Covered Call Options

2 Mar 2022 – sold 1 call option with strike price $47 expiring 1 April 2022 for a premium of $44. Closed on 7 Mar 2022 for $7. Profit = $37

7 Mar 2022 – sold 1 call option with strike price $43 expiring 1 Apr 2022 for a premium of $38. Closed on 21 March for $110. Loss: $72

After I sold the 7 March call option, BAC experienced a significant price uplift to $42.90. This was very close to my strike price. If the stock is called away, my loss would be $4,715-$4,300 = $415. Although I have 2 weeks more, I decided to close the losing trade early. I kept looking at it and thinking about it. I made a slight loss of $72.00.

The share price subsequently fell but I didn’t manage to catch the opportunity to sell calls after the recent 7 March call option fright.

June 2022

BAC share price is currently $36.30 making it difficult to sell calls without risking major loss. But I will monitor for good risk/reward opportunity.

The data I used for evaluation are sourced from and Moomoo (affiliate link). I have trading accounts with them and it includes access to relevant company and market information.

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