DirectTV (DTV) 11/20/09 PriceWatch Alert Could Hit 26.91% Return

Posted: Friday, November 20, 2009 8:08 AM EDT

DirectTV (NasdaqNM: DTV) closed yesterday at $31.50. So far the stock has hit a 52-week low of $17.85 and 52-week high of $31.80. DirectTV stock has been showing support around 29.69 and resistance in the 32.71 range. Technical indicators for the stock are Bullish and S&P gives DTV a neutral 3 STAR (out of 5) hold rating. DTV appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 31 covered call (DTV AL) for a net debit in the $29.75 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 5.56% downside protection and a 4.20% assigned return rate for a 26.91% 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 DTV Jan '11 20 Call (VGL AD) and selling the Jan '10 31 call (DTV AL) for a $10.25 debit. The trade has a 57 day life and would provide 3.97% downside protection and a 7.32% assigned return rate for a 47.00% annualized return rate (for comparison purposes only). DirectTV does not pay dividends at this time. [FBB-Seven Summits Research]

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