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Options Action: Bank of America

With Bank of America CEO Brian Moynihan suggesting that a dividend increase is likely, should you turn bullish on the bank?

Rather than establish a position at current levels, Scott Nations of NationShares recommends selling a put. (Not to be confused with buying puts, selling a put obligates you to the stock at a lower price should the option be exercised – in essence the stock can be put to you.)

“I like selling puts on stocks I'd be willing to own at a discount,” he says. "I collect the premium and buy a good stock at a good price if it falls while pocketing the premium if it's sideways or higher.”

"Bank of America is a much better bank than the market gives it credit for -- so I like selling the Jan 11 put at 0.40 with BAC at 11.60. I buy the stock at an effective price of 10.60 if it's below that 11 strike at expiration which translates to an 8.5% discount.”

Learn more about this trade. Watch the video now.


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Trader disclosure: On December 7th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour Owns (AAPL), (BAC), (BX), (CSCO), (GE); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova Owns (C), (GS), (NKE), (OXY), (PEP), (PFE), (VRTS), (UPL)

For Anthony Scaramucci
Scaramucci and SkyBridge Capital own (BAC)
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For Brian Kelly
Accounts Managed By Kanundrum Capital Own (DRYS) calls
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For Scott Nations
Nations is long (TBT)

For Nick Calamos
Calamos Investments Mutual Funds Own (ORCL)
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Calamos Investments Mutual Funds Own Autonomy
Calamos Investments Owns (ALTR) Calls

For Peter Boockvar
***No Disclosures***

CNBC.com with wires.

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BAC
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