Polo Ralph Lauren (RL) 3/12/10 PriceWatch Alert Up To 8.10% Downside Protection

Posted: Friday, March 12, 2010 8:23 AM EDT
By: Market Intelligence Center Staff

Polo Ralph Lauren (NYSE: RL) closed yesterday at $82.67. So far the stock has hit a 52-week low of $34.68 and 52-week high of $86.97. Polo Ralph Lauren stock has been showing support around 80.90 and resistance in the 83.64 range. Technical indicators for the stock are Bullish and S&P gives RL a very positive 5 STAR (out of 5) strong buy rating. RL appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jul '10 80 covered call for a net debit in the $75.97 area. That is also the break even stock price for this trade. This covered call has a 127 day duration, provides 8.10% downside protection and a 5.30% assigned return rate for a 15.25% 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 RL Jan '11 60 Call and selling the Jul '10 80 call for a $17.95 debit. The trade has a 127 day life and would provide 5.71% downside protection and an 11.42% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). Polo Ralph Lauren has a current annual dividend yield of 0.48%. [FBB-Seven Summits Research]