SAP AG (SAP) PriceWatch Alert Targets 31.22% Return

Posted: Monday, June 22, 2009 8:07 AM EDT

SAP AG (NYSE: SAP) ended the last trading session at $40.07. So far the stock has hit a 52-week low of $29.31 and 52-week high of $59.42. SAP AG stock has been showing support around 39.75 and resistance in the 40.63 range. Technical indicators for the stock are Bearish and S&P gives SAP a positive 4 STAR (out of 5) buy rating. SAP appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Sep '09 40 covered call (SAP IH) for a net debit in the $37.17 area. That is also the break even stock price for this trade. This covered call has an 89 day duration, provides 7.24% downside protection and a 7.61% assigned return rate for a 31.22% 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 SAP Jan '10 30 Call (WTA AF) and selling the Sep '09 40 call (SAP IH) for an $8.50 debit. The trade has an 89 day life and would provide 3.92% downside protection and a 17.65% assigned return rate for a 72.00% annualized return rate (for comparison purposes only). SAP AG 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]

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