McAfee (MFE) trade Opportunity From Investors Observer Momentum Plays List

Posted: Thursday, November 19, 2009 8:28 AM EDT

McAfee (NYSE: MFE) closed yesterday at $41.63. So far the stock has hit a 52-week low of $25.72 and 52-week high of $45.68. McAfee stock has been showing support around 40.84 and resistance in the 42.56 range. Technical indicators for the stock are Bearish and S&P gives MFE a positive 4 STAR (out of 5) buy rating. MFE appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 40 covered call (MFE AH) for a net debit in the $38.68 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 7.09% downside protection and a 3.41% assigned return rate for a 21.48% 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 MFE Jan '11 20 Call (VNE AD) and selling the Jan '10 40 call (MFE AH) for a $19.40 debit. The trade has a 58 day life and would provide 5.36% downside protection and a 3.09% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). McAfee does not pay dividends at this time. [THA-Seven Summits Research]

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