Motorola (MOT) PriceWatch Alert With 16.95% Downside Protection

Posted on Wednesday, August 27, 2008 8:07 AM

Motorola (NYSE: MOT) closed yesterday at $9.56. So far the stock has hit a 52-week low of $6.62 and 52-week high of $19.68. Motorola stock has been showing support around 9.31 and resistance in the 9.79 range. Technical indicators for the stock are Bullish and S&P gives MOT a neutral 3 STAR (out of 5) hold rating. MOT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '09 9 covered call (MOT DL) for a net debit in the $7.94 area. That is also the break even stock price for this trade. This covered call has a 234 day duration, provides 16.95% downside protection and a 13.35% assigned return rate for a 20.82% 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 MOT Jan '10 5 Call (WMA AA) and selling the Apr '09 9 call (MOT DL) for a $3.23 debit. The trade has a 234 day life and would provide 13.91% downside protection and a 23.84% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Motorola has a current annual dividend yield of 2.00%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]