HSBC PLC (HBC) PriceWatch Alert Up To 5.18% Downside Protection

Posted on Tuesday, July 08, 2008 8:07 AM

HSBC PLC (NYSE: HBC) closed yesterday at $75.27. So far the stock has hit a 52-week low of $69.25 and 52-week high of $99.52. HSBC PLC stock has been showing support around 73.68 and resistance in the 76.78 range. Technical indicators for the stock are Bearish and S&P gives HBC a weak 2 STAR (out of 5) sell rating. HBC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Sep '08 75 covered call (HBC IO) for a net debit in the $71.37 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 5.18% downside protection and a 5.09% assigned return rate for a 25.09% 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 HBC Jan '09 65 Call (OWV AM) and selling the Sep '08 75 call (HBC IO) for an $8.50 debit. The trade has a 74 day life and would provide 2.35% downside protection and a 17.65% assigned return rate for an 87.00% annualized return rate (for comparison purposes only). HSBC PLC does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]