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General Electric (GE) 2/9/10 PriceWatch Alert Up To 8.46% Downside Protection

Posted: Tuesday, February 09, 2010 8:34 AM EDT

General Electric (NYSE: GE) closed yesterday at $15.60. So far the stock has hit a 52-week low of $5.73 and 52-week high of $17.52. General Electric stock has been showing support around 15.27 and resistance in the 16.01 range. Technical indicators for the stock are Bearish and S&P gives GE a positive 4 STAR (out of 5) buy rating. GE appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Sep '10 16 covered call for a net debit in the $14.28 area. That is also the break even stock price for this trade. This covered call has a 221 day duration, provides 8.46% downside protection and a 12.04% assigned return rate for a 19.89% 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 GE Jan '11 12.50 Call and selling the Sep '10 16 call for a $2.53 debit. The trade has a 221 day life and would provide 3.65% downside protection and a 38.34% assigned return rate for a 63.00% annualized return rate (for comparison purposes only). General Electric has a current annual dividend yield of 2.49%. [ATU-Seven Summits Research]

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