Garmin (GRMN) 11/17/09 PriceWatch Alert With $28.30 Break Even

Posted: Tuesday, November 17, 2009 8:08 AM EDT

Garmin (NasdaqNM: GRMN) closed yesterday at $31.80. So far the stock has hit a 52-week low of $14.40 and 52-week high of $39.65. Garmin stock has been showing support around 29.91 and resistance in the 32.89 range. Technical indicators for the stock are Neutral and S&P gives GRMN a neutral 3 STAR (out of 5) hold rating. GRMN appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 32 covered call (GQR DM) for a net debit in the $28.30 area. That is also the break even stock price for this trade. This covered call has a 151 day duration, provides 11.01% downside protection and a 13.07% assigned return rate for a 31.60% 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 GRMN Jan '11 17.50 Call (VWM AW) and selling the Apr '10 32 call (GQR DM) for an $11.10 debit. The trade has a 151 day life and would provide 10.06% downside protection and a 30.63% assigned return rate for a 74.00% annualized return rate (for comparison purposes only). Garmin has a current annual dividend yield of 2.51%. [ATU-Seven Summits Research]

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