Sigma Designs (SIGM) NewsBite

Posted on Thursday, May 08, 2008 8:49 AM

Sigma Designs (NGM: SIGM) closed yesterday at $21.77. So far the stock has hit a 52-week low of $15.31 and 52-week high of $73.00. Sigma Designs stock has been showing support around 20.74 and resistance in the 23.40 range. Technical indicators for the stock are Bearish. For a hedged play on this stock, look at a Jan '09 17.50 covered call (ZMB AW) for a net debit in the $15.17 area. That is also the break even stock price for this trade. This covered call has a 254 day duration, provides 30.32% downside protection and a 15.36% assigned return rate for a 22.07% 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 SIGM Jan '09 12.50 Call (OQE AV) and selling the Jan '09 17.50 call (ZMB AW) for a $3.60 debit. The trade has a 254 day life and would provide 26.05% downside protection and a 38.89% assigned return rate for a 56.00% annualized return rate (for comparison purposes only). Sigma Designs does not pay dividends at this time. [IHF - Investors Observer]