Goodyear Tire and Rubber (GT) PriceWatch Alert Up To 46.34% Downside Protection

Posted: Wednesday, May 20, 2009 8:07 AM EDT

Goodyear Tire and Rubber (NYSE: GT) closed yesterday at $12.30. So far the stock has hit a 52-week low of $3.17 and 52-week high of $28.39. Goodyear stock has been showing support around 11.33 and resistance in the 13.03 range. Technical indicators for the stock are Bullish and S&P gives GT a neutral 3 STAR (out of 5) hold rating. GT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 7.50 covered call (GT AU) for a net debit in the $6.60 area. That is also the break even stock price for this trade. This covered call has a 241 day duration, provides 46.34% downside protection and a 13.64% assigned return rate for a 20.65% 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 GT Jan '10 5 Call (GT AA) and selling the Jan '10 7.50 call (GT AU) for a $2.15 debit. The trade has a 241 day life and would provide 41.87% downside protection and a 16.28% assigned return rate for a 25.00% annualized return rate (for comparison purposes only). Goodyear 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]

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