PepsiCo (PEP) 3/15/10 PriceWatch Alert Shows Bullish Technicals

Posted: Monday, March 15, 2010 8:25 AM EDT
By: Market Intelligence Center Staff

PepsiCo (NYSE: PEP) ended the last trading session at $65.10. So far the stock has hit a 52-week low of $47.50 and 52-week high of $65.25. PepsiCo stock has been showing support around 64.44 and resistance in the 65.58 range. Technical indicators for the stock are Bullish and S&P gives PEP a neutral 3 STAR (out of 5) hold rating. PEP appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jul '10 67.50 covered call for a net debit in the $63.71 area. That is also the break even stock price for this trade. This covered call has a 124 day duration, provides 2.14% downside protection and a 5.95% assigned return rate for a 17.51% 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 PEP Jan '11 60 Call and selling the Jul '10 67.50 call for a $5.81 debit. The trade has a 124 day life and would provide no downside protection and a 29.09% assigned return rate for an 86.00% annualized return rate (for comparison purposes only). PepsiCo has a current annual dividend yield of 2.79%. [ABR-Seven Summits Research]