Nike (NKE) 11/20/09 PriceWatch Alert With $61.41 Break Even

Posted: Friday, November 20, 2009 8:03 AM EDT

Nike (NYSE: NKE) closed yesterday at $63.56. So far the stock has hit a 52-week low of $38.24 and 52-week high of $66.35. Nike stock has been showing support around 62.16 and resistance in the 65.00 range. Technical indicators for the stock are Bullish and S&P gives NKE a positive 4 STAR (out of 5) buy rating. NKE appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 65 covered call (NKE AM) for a net debit in the $61.41 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 3.38% downside protection and a 5.85% assigned return rate for a 37.43% 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 NKE Jan '11 40 Call (VNK AH) and selling the Jan '10 65 call (NKE AM) for a $22.20 debit. The trade has a 57 day life and would provide 2.14% downside protection and a 12.61% assigned return rate for an 81.00% annualized return rate (for comparison purposes only). Nike has a current annual dividend yield of 1.54%. [FBB-Seven Summits Research]

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