Black & Decker (BDK) Makes Investors Observer Hedged Dividend Income List

Posted: Thursday, November 19, 2009 8:57 AM EDT

Black & Decker (NYSE: BDK) closed yesterday at $61.85. So far the stock has hit a 52-week low of $20.10 and 52-week high of $63.63. Black & Decker stock has been showing support around 61.14 and resistance in the 62.94 range. Technical indicators for the stock are Bullish and S&P gives BDK a neutral 3 STAR (out of 5) hold rating. BDK appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 60 covered call (BKP AL) for a net debit in the $58.05 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 6.14% downside protection and a 3.36% assigned return rate for a 21.14% 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 BDK Jan '11 25 Call (OFE AE) and selling the Jan '10 60 call (BKP AL) for a $34.20 debit. The trade has a 58 day life and would provide 4.28% downside protection and a 2.34% assigned return rate for a 15.00% annualized return rate (for comparison purposes only). Black & Decker has a current annual dividend yield of 0.75%. [THA-Seven Summits Research]

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