Dykstra: Take These Calls to Bank of America

The Komag(KOMG) trade continues to frustrate, just escaping my grasp. Today I want to make the following buy: 30 September 25s (QKXIE) at $1.90 or better.

There are almost four months until expiration, and the risk-to-reward makes sense. As I said yesterday, with almost 30% of the shares sold short on a float of only 22.70 million shares, this stock can make a 5-point run in the blink of an eye.

Now for today.

The strong selloff in China overnight will lead to a lower opening this morning, but I believe most traders feel it's not a key event for the U.S. market. The market is likely to place more weight on the Federal Reserve's minutes from its previous interest rate policy meeting, which will be released later today.

"Everyone" has been expecting a correction, so there should be no surprise this morning when traders see nothing but red on their TVs and computers. There will be some serious profit-taking, but it's really about the U.S. economy and profits, more than an unbelievably overheated Chinese market.

The operators on Wall Street will be in their "comfort zone" today, as they instill fear in the retail investor, leading to the always predictable panic selling.

A day when the market will almost certainly get crushed is a day you want to buy rock-solid stocks. Bank of America(BAC), which closed at $51.19 Tuesday, has been treading water for the last two months but recently has been attempting to break out of the range.

The stock has begun taking out the highs on increased volume, and on Tuesday it traded as high as $51.50. This stock is already in the DITM Portfolio, as I own 20 contracts of the August 42.50s (BACHV) with an average price of $9. Today I am going to buy 10 more August 42.50s for $8.30 or better. (Remember, please consider using limit orders.)

Bank of America's strong financial performance has helped it continue a record of returning capital to shareholders. 2006 was its 29th consecutive year of raising quarterly dividends, which increased by 12% to 56 cents per share. Over that time, Bank of America dividends have increased at an annual rate of 13%. Plus, in 2006 it repurchased $9.5 billion in shares, increasing value for shareholders. Do I need to keep going?

For those of you who have been following my daily picks, every Wednesday I lay it all on the line. Here is the latest Stat Book. Please take note of the new buy levels.

Always remember: Life is a journey; enjoy the ride!

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