Harris (HRS) Trades Lower On Heavy Volume

Posted: Monday, November 23, 2009 8:59 AM EDT

Harris (NYSE: HRS) closed yesterday at $43.07. So far the stock has hit a 52-week low of $26.11 and 52-week high of $45.41. Harris stock has been showing support around 42.48 and resistance in the 43.56 range. Technical indicators for the stock are Bullish and S&P gives HRS a neutral 3 STAR (out of 5) hold rating. HRS appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Feb '10 40 covered call (HRS BH) for a net debit in the $38.37 area. That is also the break even stock price for this trade. This covered call has an 89 day duration, provides 10.91% downside protection and a 4.25% assigned return rate for a 17.42% 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 HRS Jan '11 20 Call (ZML AD) and selling the Feb '10 40 call (HRS BH) for an $18.65 debit. The trade has an 89 day life and would provide 10.26% downside protection and a 7.24% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Harris has a current annual dividend yield of 1.98%. [ABR-Seven Summits Research]

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