Deutsche Telekom (DT) PriceWatch Alert Targets 7.96% Downside Protection

Posted on Tuesday, July 22, 2008 8:07 AM

Deutsche Telekom (NYSE: DT) closed yesterday at $17.58. So far the stock has hit a 52-week low of $15.53 and 52-week high of $23.05. Deutsche Telekom stock has been showing support around 17.38 and resistance in the 17.70 range. Technical indicators for the stock are Bullish and S&P gives DT a neutral 3 STAR (out of 5) hold rating. DT appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '09 17.50 covered call (DT AW) for a net debit in the $16.18 area. That is also the break even stock price for this trade. This covered call has a 179 day duration, provides 7.96% downside protection and an 8.16% assigned return rate for a 16.64% 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 DT Jan '09 15 Call (DT AC) and selling the Jan '09 17.50 call (DT AW) for a $1.85 debit. The trade has a 179 day life and would provide 4.15% downside protection and a 35.14% assigned return rate for a 72.00% annualized return rate (for comparison purposes only). Deutsche Telekom 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]