TD Ameritrade (AMTD) PriceWatch Alert Targets 13.58% Downside Protection

Posted on Thursday, September 04, 2008 8:07 AM

TD Ameritrade (NasdaqNM: AMTD) closed yesterday at $21.35. So far the stock has hit a 52-week low of $15.06 and 52-week high of $21.42. TD Ameritrade stock has been showing support around 20.49 and resistance in the 21.79 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 Jan '09 20 covered call (TQA AD) for a net debit in the $18.45 area. That is also the break even stock price for this trade. This covered call has a 135 day duration, provides 13.58% downside protection and an 8.40% assigned return rate for a 22.71% 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 Jan '09 20 call (TQA AD) for a $9.20 debit. The trade has a 135 day life and would provide 10.07% downside protection and an 8.70% assigned return rate for a 24.00% 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]