Bank of America: It's All You Need to Know

Updated from 11:18 a.m. EDT

Now that Bank of America (BAC) shares have climbed far from the depths of single digits and sustained that meaningful rally, some investors are looking at the firm as a benchmark not just of banking, but of the health of the U.S. economy.

Not a few investors have become more bullish on the country's prospects. Positive signals from economic data and the banking industry have outshined the clatter from cynics and naysayers. Those who are betting on a near-term economic resurgence are betting on BofA.

"A lot of traders are starting to identify BAC as a bellwether stock," says Lee Munson, chief investment officer of Portfolio Asset Management.

Last Wednesday Munson's biggest position was in Bank of America, while he was shorting the broader sector by using the ETF UltraShort Financials ProShares (SKF). While the play seems counterintuitive to some degree, Munson says it's a popular one because BofA is "safer and purer" than other banks that are overexposed to a particular geographic area, rely on proprietary trading for profits, or shore up confidence with "big personalities" like JPMorgan Chase's (JPM) Jamie Dimon.

Bank of America is the nation's largest bank, serving one half of the country's households through mortgages, credit cards, small business loans, corporate relationships and portfolio management. It has received a huge amount of taxpayer support with $45 billion in bailout funds. It acquired two deeply troubled firms at the crux of the crisis, Countrywide and Merrill Lynch.

In effect, Bank of America is the economy.

"Remember in the old days, whatever Intel (INTC) or Cisco (CSCO) did, that was it?" Munson continues. "Well, right here, right now, for the last several weeks, traders are looking at BAC on their screens all the time. Nobody's looking at the [KBW Bank index] anymore. Everybody's looking at Bank of America."

Even hedge funds that are focused on financials have gotten into the fray, as profits dried up from an arbitrage bet on Citigroup's (C) massive conversion of preferred stock into common shares. While going long BofA is a fairly basic trade, it has also been incredibly profitable for anyone who entered the stock at subterranean levels earlier this year.