Dow Chemical (DOW) PriceWatch Alert Targets 17.66% Return

Posted: Friday, June 26, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Dow Chemical (NYSE: DOW) closed yesterday at $15.88. So far the stock has hit a 52-week low of $5.89 and 52-week high of $39.99. Dow Chemical stock has been showing support around 15.04 and resistance in the 16.32 range. Technical indicators for the stock are Neutral and S&P gives DOW a neutral 3 STAR (out of 5) hold rating. DOW appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '09 13 covered call (DOW LM) for a net debit in the $11.98 area. That is also the break even stock price for this trade. This covered call has a 176 day duration, provides 24.56% downside protection and an 8.51% assigned return rate for a 17.66% 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 DOW Jan '11 5 Call (VDO AA) and selling the Dec '09 13 call (DOW LM) for a $7.00 debit. The trade has a 176 day life and would provide 24.43% downside protection and a 14.29% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Dow Chemical has a current annual dividend yield of 3.93%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]