As Bank of America defends itself on an $8.5 billion settlement, aggressive call buying suggests investors are even more bullish on the bank than before. Should you be?
Bank of America’s lawyers were in court today, fighting off challenges to a recent $8.5 billion settlement the bank reached with 22 large mortgages securities investors. The mortgages were securitized into bonds by Countrywide Financial before BoA bought the mortgage lender in 2008.
Not everyone was happy with the settlement and 65 institutions, including AIG, are in court today saying that $8.5 billion isn’t nearly enough. They claim the losses were more like $100 billion and Bank of America should pay up more.
Meanwhile, Saturday’s edition of Barron’s notes that buyers in Bank of America call options are increasing their positions, betting on the bank’s stock to move above $14 per share. A call option offers investors the right to buy shares in a stock at a specific price on a specific date. Buying calls generally suggests the investor is bullish on a stock. Though down 2.5% today, shares in Bank of America are up over 11% this past month.
Should you be bullish or should this legal risk make Bank of America shares unsettling for your portfolio? We ask Talking Numbers contributors Steve Cortes, Founder of Veracruz TJM, and JC O’Hara, Chief Market Technician at FBN Securities, where they think the bank is headed.
Watch the video above to hear insights by Cortes and O’Hara on Bank of America.
Coming up Wednesday on Talking Numbers: An interview with Domino's CEO