SAP AG (SAP) PriceWatch Alert With $53.09 Break Even

Posted on Wednesday, July 23, 2008 8:07 AM

SAP AG (NYSE: SAP) closed yesterday at $55.99. 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 55.30 and resistance in the 56.64 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 55 covered call (SAP IK) for a net debit in the $53.09 area. That is also the break even stock price for this trade. This covered call has a 59 day duration, provides 5.18% downside protection and a 3.60% assigned return rate for a 22.26% 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 40 Call (SAP AH) and selling the Sep '08 55 call (SAP IK) for a $13.85 debit. The trade has a 59 day life and would provide 3.82% downside protection and an 8.30% assigned return rate for a 51.00% 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]