SanDisk (SNDK) PriceWatch Alert With 24.66% Downside Protection

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

SanDisk (NasdaqNM: SNDK) ended the last trading session at $17.64. So far the stock has hit a 52-week low of $13.06 and 52-week high of $55.98. SanDisk stock has been showing support around 16.08 and resistance in the 18.62 range. Technical indicators for the stock are Bullish and S&P gives SNDK a weak 2 STAR (out of 5) sell rating. SNDK appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at an Apr '09 15 covered call (SWQ DC) for a net debit in the $13.29 area. That is also the break even stock price for this trade. This covered call has a 222 day duration, provides 24.66% downside protection and a 12.87% assigned return rate for a 21.15% 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 SNDK Jan '10 7.50 Call (YSD AU) and selling the Apr '09 15 call (SWQ DC) for a $6.25 debit. The trade has a 222 day life and would provide 22.05% downside protection and a 20.00% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). SanDisk 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]