SAP AG (SAP) PriceWatch Alert At $48.10 Break Even

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

SAP AG (NYSE: SAP) closed yesterday at $52.40. So far the stock has hit a 52-week low of $43.00 and 52-week high of $59.86. SAP AG stock has been showing support around 51.46 and resistance in the 53.92 range. Technical indicators for the stock are Bullish and S&P gives SAP a neutral 3 STAR (out of 5) hold rating. SAP appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Sep '08 50 covered call (SAP IJ) for a net debit in the $48.10 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 8.21% downside protection and a 3.95% assigned return rate for a 19.48% 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 SAP Jan '09 30 Call (VSP AF) and selling the Sep '08 50 call (SAP IJ) for an $18.60 debit. The trade has a 74 day life and would provide 7.25% downside protection and a 7.53% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). SAP AG 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]