TD Ameritrade (AMTD) PriceWatch Alert Up To 18.99% Downside Protection

Posted on Thursday, August 28, 2008 8:07 AM

TD Ameritrade (NasdaqNM: AMTD) closed yesterday at $20.01. So far the stock has hit a 52-week low of $15.06 and 52-week high of $21.24. TD Ameritrade stock has been showing support around 19.33 and resistance in the 20.37 range. Technical indicators for the stock are Bullish and S&P gives AMTD a neutral 3 STAR (out of 5) hold rating. AMTD appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Feb '09 17.50 covered call (TQA BW) for a net debit in the $16.21 area. That is also the break even stock price for this trade. This covered call has a 177 day duration, provides 18.99% downside protection and a 7.96% assigned return rate for a 16.41% 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 AMTD Jan '10 10 Call (WKZ AB) and selling the Feb '09 17.50 call (TQA BW) for a $7.10 debit. The trade has a 177 day life and would provide 14.54% downside protection and a 5.63% assigned return rate for a 12.00% annualized return rate (for comparison purposes only). TD Ameritrade 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]