AutoZone (AZO) 2/9/10 PriceWatch Alert With 4.78% Downside Protection

Posted: Tuesday, February 09, 2010 8:29 AM EDT
By: Market Intelligence Center Staff

AutoZone (NYSE: AZO) closed yesterday at $156.94. So far the stock has hit a 52-week low of $129.21 and 52-week high of $169.99. AutoZone stock has been showing support around 155.27 and resistance in the 160.29 range. Technical indicators for the stock are Bullish and S&P gives AZO a positive 4 STAR (out of 5) buy rating. AZO appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jun '10 160 covered call for a net debit in the $149.44 area. That is also the break even stock price for this trade. This covered call has a 130 day duration, provides 4.78% downside protection and a 7.07% assigned return rate for a 19.84% 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 AZO Jan '11 125 Call and selling the Jun '10 160 call for a $29.55 debit. The trade has a 130 day life and would provide 1.52% downside protection and an 18.44% assigned return rate for a 52.00% annualized return rate (for comparison purposes only). AutoZone does not pay dividends at this time. [ATU-Seven Summits Research]