International Business Machines (IBM) PriceWatch Alert Down To $109.13 Break Even

Posted on Monday, September 08, 2008 8:07 AM

International Business Machines (NYSE: IBM) ended the last trading session at $114.33. So far the stock has hit a 52-week low of $97.04 and 52-week high of $130.93. International Business Machines stock has been showing support around 112.28 and resistance in the 116.12 range. Technical indicators for the stock are Bearish and S&P gives IBM a very positive 5 STAR (out of 5) strong buy rating. IBM appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '09 120 covered call (IBM AD) for a net debit in the $109.13 area. That is also the break even stock price for this trade. This covered call has a 131 day duration, provides 4.55% downside protection and a 9.96% assigned return rate for a 27.75% 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 IBM Jan '10 80 Call (WIB AP) and selling the Jan '09 120 call (IBM AD) for a $33.20 debit. The trade has a 131 day life and would provide 0.99% downside protection and a 20.48% assigned return rate for a 57.00% annualized return rate (for comparison purposes only). International Business Machines has a current annual dividend yield of 1.69%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]