Potential Comcast (CMCSK) Trade Has $19.59 Breakeven

Posted: Thursday, September 15, 2011 7:53 AM EDT
By: Market Intelligence Center Staff

Comcast (NASDAQ:CMCSK) closed Wednesday's dramatic trading session at $21.74. In the past year, the stock has hit a 52-week low of $16.32 and 52-week high of $25.40. Comcast (CMCSK) stock has been showing support around $21.03 and resistance in the $22.37 range. Technical indicators for the stock are Bearish and S&P gives Comcast (CMCSK) a positive 4 STARS (out of 5) buy rating. For a hedged play on Comcast (CMCSK), look at the Jan '12 $21.00 covered call for a net debit in the $19.59 area. That is also the break-even stock price for this trade. This covered call has a duration of 128 days, provides 9.89% downside protection and an assigned return rate of 7.20% for an annualized return rate of 20.52% (for comparison purposes only). A lower-cost hedged play for Comcast (CMCSK) would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the Comcast (CMCSK) Jan '13 $10.00 call and selling the Jan '12 $21.00 call for a total debit of $10.70. The trade has a lifespan of 128 days and would provide 4.78% downside protection and an assigned return rate of 2.80% for an annualized return rate of 8% (for comparison purposes only). Comcast (CMCSK) has a current annual dividend yield of 2.17%. [THA-Seven Summits Research]