Kellogg (K) 2/9/10 PriceWatch Alert Up To 5.96% Downside Protection

Posted: Tuesday, February 09, 2010 8:35 AM EDT
By: Market Intelligence Center Staff

Kellogg (NYSE: K) closed yesterday at $52.01. So far the stock has hit a 52-week low of $35.64 and 52-week high of $55.45. Kellogg stock has been showing support around 51.44 and resistance in the 53.10 range. Technical indicators for the stock are Bearish and S&P gives K a positive 4 STAR (out of 5) buy rating. K appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jun '10 50 covered call for a net debit in the $48.91 area. That is also the break even stock price for this trade. This covered call has a 130 day duration, provides 5.96% downside protection and a 2.23% assigned return rate for a 6.26% 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 K Jan '11 40 Call and selling the Jun '10 50 call for a $9.55 debit. The trade has a 130 day life and would provide 4.73% downside protection and a 4.71% assigned return rate for a 13.00% annualized return rate (for comparison purposes only). Kellogg has a current annual dividend yield of 2.86%. [ATU-Seven Summits Research]