Kraft Foods (KFT) PriceWatch Alert Could Hit 15.60% Return

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

Kraft Foods (NYSE: KFT) ended the last trading session at $32.68. So far the stock has hit a 52-week low of $28.04 and 52-week high of $35.29. Kraft Foods stock has been showing support around 31.03 and resistance in the 33.57 range. Technical indicators for the stock are Bullish and S&P gives KFT a neutral 3 STAR (out of 5) hold rating. KFT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '08 32.50 covered call (KFT LZ) for a net debit in the $31.13 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 4.74% downside protection and a 4.40% assigned return rate for a 15.60% 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 KFT Jan '10 20 Call (YTW AD) and selling the Dec '08 32.50 call (KFT LZ) for an $11.20 debit. The trade has a 103 day life and would provide 4.53% downside protection and an 11.61% assigned return rate for a 41.00% annualized return rate (for comparison purposes only). Kraft Foods has a current annual dividend yield of 3.41%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]