Yahoo (YHOO) 12/22/09 PriceWatch Alert With $14.48 Break Even

Posted: Tuesday, December 22, 2009 8:09 AM EDT

Yahoo (NASDAQ: YHOO) closed yesterday at $15.88. So far the stock has hit a 52-week low of $10.81 and 52-week high of $18.02. Yahoo stock has been showing support around 15.65 and resistance in the 16.29 range. Technical indicators for the stock are Bullish and S&P gives YHOO a very positive 5 STAR (out of 5) strong buy rating. YHOO appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jul '10 16 covered call for a net debit in the $14.48 area. That is also the break even stock price for this trade. This covered call has a 207 day duration, provides 8.82% downside protection and a 10.50% assigned return rate for an 18.51% 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 YHOO Jan '11 10 Call and selling the Jul '10 16 call for a $4.95 debit. The trade has a 207 day life and would provide 5.86% downside protection and a 21.21% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Yahoo does not pay dividends at this time. [ATU-Seven Summits Research]

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