Starwood Hotels and Resorts (HOT) PriceWatch Alert Down To $11.32 Break Even

Posted: Thursday, May 14, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Starwood Hotels and Resorts (NYSE: HOT) closed yesterday at $19.72. So far the stock has hit a 52-week low of $8.99 and 52-week high of $54.00. Starwood Hotels stock has been showing support around 18.69 and resistance in the 21.51 range. Technical indicators for the stock are Bullish and S&P gives HOT a very weak 1 STAR (out of 5) strong sell rating. HOT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Nov '09 12.50 covered call (HOT KV) for a net debit in the $11.32 area. That is also the break even stock price for this trade. This covered call has a 191 day duration, provides 42.60% downside protection and a 10.42% assigned return rate for a 19.92% 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 HOT Jan '10 7.50 Call (YUS AU) and selling the Nov '09 12.50 call (HOT KV) for a $4.40 debit. The trade has a 191 day life and would provide 39.66% downside protection and a 13.64% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Starwood Hotels has a current annual dividend yield of 4.11%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]