General Dynamics (GD) PriceWatch Alert for November 19, 2009

Posted: Thursday, November 19, 2009 8:34 AM EDT

General Dynamics (NYSE: GD) closed yesterday at $67.34. So far the stock has hit a 52-week low of $35.28 and 52-week high of $68.84. General Dynamics stock has been showing support around 66.54 and resistance in the 68.46 range. Technical indicators for the stock are Bullish and S&P gives GD a neutral 3 STAR (out of 5) hold rating. GD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 70 covered call (GD AN) for a net debit in the $65.99 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 2.00% downside protection and a 6.08% assigned return rate for a 38.24% 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 GD Jan '11 50 Call (VJH AJ) and selling the Jan '10 70 call (GD AN) for a $17.55 debit. The trade has a 58 day life and would provide no downside protection and a 13.96% assigned return rate for an 88.00% annualized return rate (for comparison purposes only). General Dynamics has a current annual dividend yield of 2.23%. [THA-Seven Summits Research]

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