International Business Machines (IBM) 12/31/09 PriceWatch Alert Technicals Showing Bullish

Posted: Thursday, December 31, 2009 8:29 AM EDT
By: Market Intelligence Center Staff

International Business Machines (NYSE: IBM) closed yesterday at $132.57. So far the stock has hit a 52-week low of $81.76 and 52-week high of $132.68. International Business Machines stock has been showing support around 129.98 and resistance in the 133.98 range. Technical indicators for the stock are Bullish and S&P gives IBM a very positive 5 STAR (out of 5) strong buy rating. IBM appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Feb '10 140 covered call for a net debit in the $131.58 area. That is also the break even stock price for this trade. This covered call has a 51 day duration, provides 0.75% downside protection and a 6.40% assigned return rate for a 45.80% 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 IBM Jan '11 100 Call and selling the Feb '10 140 call for a $33.46 debit. The trade has a 51 day life and would provide no downside protection and a 19.55% assigned return rate for a 140.00% annualized return rate (for comparison purposes only). International Business Machines has a current annual dividend yield of 1.66%. [THA-Seven Summits Research]