I am levering up on BAC here via buying at the money calls. Overall allocation to my BAC position will decrease as I intend to sell my equity position and use 80% of the proceeds to purchase 2012 calls. As long as the economy continues to recover slowly, it is my belief that as BAC was 'too big to fail' it will be 'too big not to succeed'.
My thought process for this trade:
I don't believe the stock can stay in the $10-15 range for 2011. If BAC is lower than $10 a share in 2012 then we are most likely headed for the next wave of equity apocalypse and buying opportunies shall be had. Else, the world ends and money is the least of my concern.
There are many reasonable cases in which I lose my entire position. But I think the odds and the upside is there.
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