Gap (GPS) 2/9/10 PriceWatch Alert Shows Bearish Technicals

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

Gap (NYSE: GPS) closed yesterday at $19.67. So far the stock has hit a 52-week low of $9.56 and 52-week high of $23.36. Gap stock has been showing support around 19.48 and resistance in the 20.02 range. Technical indicators for the stock are Bearish and S&P gives GPS a neutral 3 STAR (out of 5) hold rating. GPS appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Sep '10 20 covered call for a net debit in the $17.97 area. That is also the break even stock price for this trade. This covered call has a 221 day duration, provides 8.64% downside protection and an 11.30% assigned return rate for an 18.66% 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 GPS Jan '11 15 Call and selling the Sep '10 20 call for a $3.80 debit. The trade has a 221 day life and would provide 4.42% downside protection and a 31.58% assigned return rate for a 52.00% annualized return rate (for comparison purposes only). Gap has a current annual dividend yield of 1.75%. [ATU-Seven Summits Research]