Safeway (SWY) 11/20/09 PriceWatch Alert Support At Around $22.21

Posted: Friday, November 20, 2009 8:31 AM EDT

Safeway (NYSE: SWY) closed yesterday at $22.50. So far the stock has hit a 52-week low of $17.19 and 52-week high of $24.32. Safeway stock has been showing support around 22.21 and resistance in the 22.91 range. Technical indicators for the stock are Bullish and S&P gives SWY a weak 2 STAR (out of 5) sell rating. SWY appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jun '10 20 covered call (SWY FD) for a net debit in the $19.10 area. That is also the break even stock price for this trade. This covered call has a 211 day duration, provides 15.11% downside protection and a 4.71% assigned return rate for an 8.15% 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 SWY Jan '11 12.50 Call (VYW AV) and selling the Jun '10 20 call (SWY FD) for a $6.90 debit. The trade has a 211 day life and would provide 13.78% downside protection and an 8.70% assigned return rate for a 15.00% annualized return rate (for comparison purposes only). Safeway has a current annual dividend yield of 1.73%. [FBB-Seven Summits Research]

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