Staples (SPLS) 11/20/09 PriceWatch Alert Up To 8.39% Downside Protection

Posted: Friday, November 20, 2009 8:02 AM EDT

Staples (NasdaqNM: SPLS) closed yesterday at $22.65. So far the stock has hit a 52-week low of $14.09 and 52-week high of $23.55. Staples stock has been showing support around 22.23 and resistance in the 23.09 range. Technical indicators for the stock are Bullish and S&P gives SPLS a weak 2 STAR (out of 5) sell rating. SPLS appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jun '10 23 covered call (PLQ FM) for a net debit in the $20.75 area. That is also the break even stock price for this trade. This covered call has a 211 day duration, provides 8.39% downside protection and a 10.84% assigned return rate for an 18.76% 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 SPLS Jan '11 17.50 Call (OQZ AW) and selling the Jun '10 23 call (PLQ FM) for a $4.35 debit. The trade has a 211 day life and would provide 3.53% downside protection and a 26.44% assigned return rate for a 46.00% annualized return rate (for comparison purposes only). Staples has a current annual dividend yield of 0.36%. [FBB-Seven Summits Research]

Click Symbol For More News On: (SPLS)