Honda Motor (HMC) PriceWatch Alert Down To $18.97 Break Even

Posted: Thursday, February 19, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Honda Motor (NYSE: HMC) closed yesterday at $24.27. So far the stock has hit a 52-week low of $17.35 and 52-week high of $36.40. Honda Motor stock has been showing support around 23.80 and resistance in the 24.68 range. Technical indicators for the stock are Bullish and S&P gives HMC a weak 2 STAR (out of 5) sell rating. HMC appears on the Investors Observer Stocks In The News list. HMC rose $0.90 (3.85%) Wednesday on news that the company will cut its production of business jets by up to 30 percent in order to cut costs. The company is also reportedly considering additional job cuts. For a hedged play on this stock, look at a Jan '10 22.50 covered call (YMD AX) for a net debit in the $18.97 area. That is also the break even stock price for this trade. This covered call has a 331 day duration, provides 21.84% downside protection and an 18.61% assigned return rate for a 20.52% 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 HMC Jan '10 12.50 Call (YMD AV) and selling the Jan '10 22.50 call (YMD AX) for a $7.40 debit. The trade has a 331 day life and would provide 18.01% downside protection and a 35.14% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). Honda Motor has a current annual dividend yield of 1.31%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]