Home Depot (HD) 9/7/10 PriceWatch Alert Could Hit 26.32% Return

Posted: Monday, September 06, 2010 8:27 AM EDT
By: Market Intelligence Center Staff

Home Depot (NYSE: HD) ended the last trading session at $29.85. So far the stock has hit a 52-week low of $24.47 and 52-week high of $37.03. Home Depot stock has been showing support around 29.10 and resistance in the 30.70 range. Technical indicators for the stock are Bullish and S&P gives HD a neutral 3 STAR (out of 5) hold rating. HD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Nov '10 30 covered call for a net debit in the $28.48 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 4.59% downside protection and a 5.34% assigned return rate for a 26.32% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the HD Jan '12 15 Call and selling the Nov '10 30 call for a $13.58 debit. The trade has a 74 day life and would provide 4.25% downside protection and a 10.46% assigned return rate for a 52.00% annualized return rate (for comparison purposes only). Home Depot has a current annual dividend yield of 3.30%. [ATU-Seven Summits Research]