Time Warner (TWX) 11/20/09 PriceWatch Alert With $30.65 Break Even

Posted: Friday, November 20, 2009 8:45 AM EDT

Time Warner (NYSE: TWX) closed yesterday at $32.30. So far the stock has hit a 52-week low of $17.81 and 52-week high of $33.45. Time Warner stock has been showing support around 31.23 and resistance in the 33.17 range. Technical indicators for the stock are Bullish and S&P gives TWX a neutral 3 STAR (out of 5) hold rating. TWX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 32 covered call (AOE AF) for a net debit in the $30.65 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 5.11% downside protection and a 4.40% assigned return rate for a 28.20% 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 TWX Jan '11 20 Call (VAN AD) and selling the Jan '10 32 call (AOE AF) for an $11.25 debit. The trade has a 57 day life and would provide 3.25% downside protection and a 6.67% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). Time Warner has a current annual dividend yield of 2.30%. [FBB-Seven Summits Research]

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