Analog Devices Inc. (ADI) PriceWatch Alert Could Hit 13.23% Return

Posted: Tuesday, June 30, 2009 8:07 AM EDT

Analog Devices Inc. (NYSE: ADI) closed yesterday at $24.68. So far the stock has hit a 52-week low of $15.29 and 52-week high of $33.53. Analog Devices stock has been showing support around 24.26 and resistance in the 25.32 range. Technical indicators for the stock are Bullish and S&P gives ADI a neutral 3 STAR (out of 5) hold rating. ADI appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Dec '09 22.50 covered call (ADI LX) for a net debit in the $21.18 area. That is also the break even stock price for this trade. This covered call has a 172 day duration, provides 14.18% downside protection and a 6.23% assigned return rate for a 13.23% 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 ADI Jan '11 15 Call (VIK AC) and selling the Dec '09 22.50 call (ADI LX) for a $6.70 debit. The trade has a 172 day life and would provide 12.07% downside protection and an 11.94% assigned return rate for a 25.00% annualized return rate (for comparison purposes only). Analog Devices has a current annual dividend yield of 3.23%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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