Time Warner (TWX) PriceWatch Alert Up To 15.60% Downside Protection

Posted on Monday, July 14, 2008 8:07 AM

Time Warner (NYSE: TWX) ended the last trading session at $13.78. So far the stock has hit a 52-week low of $13.53 and 52-week high of $21.17. Time Warner stock has been showing support around 13.33 and resistance in the 14.19 range. Technical indicators for the stock are Bearish and S&P gives TWX a neutral 3 STAR (out of 5) hold rating. TWX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '09 12.50 covered call (TWX AV) for a net debit in the $11.63 area. That is also the break even stock price for this trade. This covered call has an 187 day duration, provides 15.60% downside protection and a 7.48% assigned return rate for a 14.60% 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 TWX Jan '09 10 Call (TWX AB) and selling the Jan '09 12.50 call (TWX AV) for a $2.00 debit. The trade has an 187 day life and would provide 12.92% downside protection and a 25.00% assigned return rate for a 49.00% annualized return rate (for comparison purposes only). Time Warner 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]