HSBC PLC (HBC) PriceWatch Alert Bearish Price Movement

Posted on Thursday, July 10, 2008 8:07 AM

HSBC PLC (NYSE: HBC) closed yesterday at $75.39. 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 73.82 and resistance in the 78.16 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 $71.59 area. That is also the break even stock price for this trade. This covered call has a 72 day duration, provides 5.04% downside protection and a 4.76% assigned return rate for a 24.15% 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 60 Call (OWV AL) and selling the Sep '08 75 call (HBC IO) for a $12.85 debit. The trade has a 72 day life and would provide 3.37% downside protection and a 16.73% assigned return rate for an 85.00% 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]