Limited Brands (LTD) PriceWatch Alert At $18.46 Break Even

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

Limited Brands (NYSE: LTD) closed yesterday at $22.06. So far the stock has hit a 52-week low of $14.41 and 52-week high of $24.24. Limited Brands stock has been showing support around 20.31 and resistance in the 23.01 range. Technical indicators for the stock are Bullish and S&P gives LTD a neutral 3 STAR (out of 5) hold rating. LTD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '09 20 covered call (LTD AD) for a net debit in the $18.46 area. That is also the break even stock price for this trade. This covered call has a 135 day duration, provides 16.32% downside protection and an 8.34% assigned return rate for a 22.56% 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 LTD Jan '10 10 Call (WDL AB) and selling the Jan '09 20 call (LTD AD) for an $8.90 debit. The trade has a 135 day life and would provide 14.32% downside protection and a 12.36% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). Limited Brands has a current annual dividend yield of 2.88%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]