Safeway (SWY) PriceWatch Alert Targets 24.23% Return

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

Safeway (NYSE: SWY) ended the last trading session at $26.15. So far the stock has hit a 52-week low of $24.92 and 52-week high of $36.00. Safeway stock has been showing support around 24.45 and resistance in the 27.09 range. Technical indicators for the stock are Bearish and S&P gives SWY a positive 4 STAR (out of 5) buy rating. SWY appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '08 25 covered call (SWY LE) for a net debit in the $23.40 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 10.52% downside protection and a 6.84% assigned return rate for a 24.23% 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 SWY Jan '10 15 Call (WYF AC) and selling the Dec '08 25 call (SWY LE) for a $9.20 debit. The trade has a 103 day life and would provide 7.46% downside protection and an 8.70% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). Safeway has a current annual dividend yield of 1.24%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]