National Semiconductor (NSM) PriceWatch Alert Up To 12.91% Downside Protection

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

National Semiconductor (NYSE: NSM) closed yesterday at $21.69. So far the stock has hit a 52-week low of $16.21 and 52-week high of $28.04. National Semiconductor stock has been showing support around 21.24 and resistance in the 22.32 range. Technical indicators for the stock are Bullish and S&P gives NSM a positive 4 STAR (out of 5) buy rating. NSM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Nov '08 20 covered call (NSM KD) for a net debit in the $18.89 area. That is also the break even stock price for this trade. This covered call has a 123 day duration, provides 12.91% downside protection and a 5.88% assigned return rate for a 17.44% 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 NSM Jan '09 15 Call (NSM AC) and selling the Nov '08 20 call (NSM KD) for a $4.35 debit. The trade has a 123 day life and would provide 10.79% downside protection and a 14.94% assigned return rate for a 44.00% annualized return rate (for comparison purposes only). National Semiconductor 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]