Textron (TXT) 2/9/10 PriceWatch Alert With $14.91 Break Even

Posted: Tuesday, February 09, 2010 8:34 AM EDT
By: Market Intelligence Center Staff

Textron (NYSE: TXT) closed yesterday at $18.71. So far the stock has hit a 52-week low of $3.57 and 52-week high of $23.46. Textron stock has been showing support around 17.89 and resistance in the 19.65 range. Technical indicators for the stock are Bearish and S&P gives TXT a positive 4 STAR (out of 5) buy rating. TXT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 16 covered call for a net debit in the $14.91 area. That is also the break even stock price for this trade. This covered call has a 130 day duration, provides 20.31% downside protection and a 7.31% assigned return rate for a 20.53% 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 TXT Jan '11 5 Call and selling the Jun '10 16 call for a $10.40 debit. The trade has a 130 day life and would provide 17.69% downside protection and a 5.77% assigned return rate for a 16.00% annualized return rate (for comparison purposes only). Textron has a current annual dividend yield of 0.41%. [ATU-Seven Summits Research]