Sony (SNE) 12/4/09 PriceWatch Alert With $25.48 Break Even

Posted: Friday, December 04, 2009 8:11 AM EDT
By: Market Intelligence Center Staff

Sony (NYSE: SNE) closed yesterday at $27.98. So far the stock has hit a 52-week low of $15.64 and 52-week high of $30.82. Sony stock has been showing support around 27.56 and resistance in the 28.70 range. Technical indicators for the stock are Bullish and S&P gives SNE a weak 2 STAR (out of 5) sell rating. SNE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 27.50 covered call (SNE DY) for a net debit in the $25.48 area. That is also the break even stock price for this trade. This covered call has a 134 day duration, provides 8.93% downside protection and a 7.93% assigned return rate for a 21.59% 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 SNE Jan '11 17.50 Call (VY AW) and selling the Apr '10 27.50 call (SNE DY) for a $9.20 debit. The trade has a 134 day life and would provide 4.57% downside protection and an 8.70% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). Sony has a current annual dividend yield of 0.90%. [FBB-Seven Summits Research]