Charlotte, NC-based Bank of America (NYSE: BAC) is scheduled to report earnings before the market open on Wednesday, with analysts projecting EPS of $0.26 per share on revenue of $21.24 Billion. BAC shares have moved an average of 2.9% over the past 8 quarters, having risen 2 of the past 4 quarters, but only 5 of the past 8. The near-term 16.5 straddle is implying roughly a 3.7% move, with the stock having closed Monday’s session at $16.43.
While the company is expected to announce positive numbers, due in part due CEO Brian Moynihan’s cost cutting programs, I’m bullish on the stock in the longer-term. Analysts have said Bank of America stands to gain as much 15% EPS should interest rates rise by 1%, 2 to 3 times as much its rivals. With the housing recovery forecasted to continue well into 2015, Bank of America stands to benefit as one of the largest mortgage lenders in the country.
On Tuesday morning, J.P. Morgan and Wells Fargo Corporation posted better-than-expected EPS numbers in pre-market earnings calls.
MY TRADE
Buy the BAC Aug 16 Calls for around $1.70
Risk: $170 per 1 Lot
Reward: Theoretically Unlimited
Break-even at expiration: $17.70
