Aeropostale (ARO) 11/19/09 PriceWatch Alert Support Down To $31.76

Posted: Thursday, November 19, 2009 8:21 AM EDT

Aeropostale (NYSE: ARO) closed yesterday at $32.39. So far the stock has hit a 52-week low of $12.52 and 52-week high of $44.85. Aeropostale stock has been showing support around 31.76 and resistance in the 33.58 range. Technical indicators for the stock are Bearish and S&P gives ARO a positive 4 STAR (out of 5) buy rating. ARO appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 30 covered call (ARO AF) for a net debit in the $28.59 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 11.73% downside protection and a 4.93% assigned return rate for a 31.04% 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 ARO Jan '11 5 Call (ZLX AA) and selling the Jan '10 30 call (ARO AF) for a $23.95 debit. The trade has a 58 day life and would provide 10.62% downside protection and a 4.38% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Aeropostale does not pay dividends at this time. [THA-Seven Summits Research]

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