Jim Strugger's Option Strategy For Bank Of America

All the 31 banks that went through Fed's stress test passed the first test last Thursday. However, how many will be able to clear the second phase, results for which will be declared on Wednesday, is what everyone on the Street is interested in knowing.

MKM Holdings Derivatives Strategist, Jim Strugger, was on Bloomberg Monday to share his option trading strategy for Bank of America Corp BAC going into Wednesday and discuss how the unemployment numbers last Friday have affected asset classes.

No Asset Class Will Be Spared

"I think what Friday was, is a reminder that we are in an environment of elevated cross asset co-relation," Strugger said. "Better employment report, 10 year U.S. treasury up to two and a quarter, dollar index moves up to its highest level since 2003."

He continued, "We put out a note this morning with 36 ETFs in it that represent global equity indices, sector indices and it looks across asset classes, every single one of them was down on Friday. So again an environment where something like U.S. monetary policy, sharp movements in the dollar won't be escaped by really any asset class or equity indices globally going forward."

Higher ‘Floor' For VIX

"The risk that the floor for the VIX is higher than it's been over the last couple of years and it's easy to see why, again looking back to Friday. So, the 10 to 12 range that we saw in the beginning in 2013 through much of 2014 that maybe gone and that floor might be closer to 14," Strugger remarked.

Bank of America Trade

"So, last Thursday results came out of the initial part of the Fed's stress test, all 31 banks passed. Wednesday, we will get the second part of that. The two names we wanted to own in this- Bank of America and Citi. Bank of America specifically looks very cheap. We want to go out to June and buy 17 strike calls, very simple long directional exposure," Strugger concluded.