Cisco Systems (CSCO) PriceWatch Alert With $21.92 Break Even

Posted on Tuesday, August 19, 2008 8:07 AM

Cisco Systems (NasdaqNM: CSCO) closed yesterday at $24.49. So far the stock has hit a 52-week low of $20.56 and 52-week high of $34.24. Cisco Systems stock has been showing support around 23.80 and resistance in the 25.42 range. Technical indicators for the stock are Bullish and S&P gives CSCO a neutral 3 STAR (out of 5) hold rating. CSCO appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '09 25 covered call (CYQ DE) for a net debit in the $21.92 area. That is also the break even stock price for this trade. This covered call has a 242 day duration, provides 10.49% downside protection and a 14.05% assigned return rate for a 21.19% 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 CSCO Jan '10 15 Call (WCY AC) and selling the Apr '09 25 call (CYQ DE) for an $8.18 debit. The trade has a 242 day life and would provide 5.35% downside protection and a 22.25% assigned return rate for a 34.00% annualized return rate (for comparison purposes only). Cisco Systems 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]