Nordstrom (JWN) 11/19/09 PriceWatch Alert Up To 9.46% Downside Protection

Posted: Thursday, November 19, 2009 8:24 AM EDT

Nordstrom (NYSE: JWN) closed yesterday at $34.87. So far the stock has hit a 52-week low of $6.61 and 52-week high of $36.52. Nordstrom stock has been showing support around 34.12 and resistance in the 35.48 range. Technical indicators for the stock are Bullish and S&P gives JWN a neutral 3 STAR (out of 5) hold rating. JWN appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 33 covered call (JDI AG) for a net debit in the $31.57 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 9.46% downside protection and a 4.53% assigned return rate for a 28.51% 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 JWN Jan '11 10 Call (VNZ AB) and selling the Jan '10 33 call (JDI AG) for a $21.80 debit. The trade has a 58 day life and would provide 8.80% downside protection and a 5.50% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). Nordstrom has a current annual dividend yield of 1.83%. [THA-Seven Summits Research]

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