Time Warner (TWX) PriceWatch Alert Targets 22.50% Return

Posted: Thursday, June 25, 2009 8:07 AM EDT

Time Warner (NYSE: TWX) closed yesterday at $24.79. So far the stock has hit a 52-week low of $17.81 and 52-week high of $50.70. Time Warner stock has been showing support around 24.13 and resistance in the 25.51 range. Technical indicators for the stock are Bullish and S&P gives TWX a neutral 3 STAR (out of 5) hold rating. TWX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Oct '09 23 covered call (TWX JW) for a net debit in the $21.49 area. That is also the break even stock price for this trade. This covered call has an 114 day duration, provides 13.31% downside protection and a 7.03% assigned return rate for a 22.50% 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 TWX Jan '11 10 Call (VAN AB) and selling the Oct '09 23 call (TWX JW) for an $11.85 debit. The trade has an 114 day life and would provide 11.86% downside protection and a 9.70% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). Time Warner has a current annual dividend yield of 3.10%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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