On Jun 3, I presented a case for Bank of America (BAC), reasoning that BAC was cheap and at about 15% discount in terms of its book value. I did go in with a long position with BAC. In the past month or so, BAC has been doing really badly and even slipped to below $10 a few days ago. My existing BAC positions are not doing well obviously, at least seemingly on paper. Am I worried about my positions? Not at all. As I alluded to, my BAC positions won't lose a penny as long as BAC stays above $7.5 by Jan 2013. A long way to go and I highly doubt it will happen unless some catastrophe occurs.
Do I like Bank of America? I really don't! To some extent I even dislike it. So I will not invest my money with BAC. But as a trade for speculation, I feel BAC is quite cheap at this price level. When it drops below $10, it stands at a super discount of about 40-50% in terms of its book value. Just as a metaphor: if you put in $1 now and if BAC is liquidated immediately, you will get about $2 back. Given this kind of value in front of your eyes, it is difficult to simply ignore and pretend to have seen nothing. So I bet more for BAC, expecting that in the very short term at least, it will recover significantly. I bought BAC Sep $10 call options. There is a potential that I may get a quick over 100% profit in the next few weeks. Of course, as a pure speculation, I may lose my money if it does not behave as I expect. We will see.
No comments:
Post a Comment