Garmin (GRMN) 11/19/09 PriceWatch Alert Up To 9.54% Downside Protection

Posted: Thursday, November 19, 2009 8:31 AM EDT

Garmin (NasdaqNM: GRMN) closed yesterday at $32.48. 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 31.63 and resistance in the 32.91 range. Technical indicators for the stock are Bullish 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 33 covered call (GQR DN) for a net debit in the $29.38 area. That is also the break even stock price for this trade. This covered call has a 149 day duration, provides 9.54% downside protection and a 12.32% assigned return rate for a 30.18% 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 20 Call (VWM AD) and selling the Apr '10 33 call (GQR DN) for a $10.05 debit. The trade has a 149 day life and would provide 7.48% downside protection and a 29.35% assigned return rate for a 72.00% annualized return rate (for comparison purposes only). Garmin has a current annual dividend yield of 2.36%. [THA-Seven Summits Research]

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