Dow Chemical (DOW) PriceWatch Alert Up To 21.16% Downside Protection

Posted: Tuesday, June 30, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Dow Chemical (NYSE: DOW) closed yesterday at $16.07. 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 15.41 and resistance in the 16.59 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 14 covered call (DOW LN) for a net debit in the $12.67 area. That is also the break even stock price for this trade. This covered call has a 172 day duration, provides 21.16% downside protection and a 10.50% assigned return rate for a 22.28% 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 14 call (DOW LN) for a $7.90 debit. The trade has a 172 day life and would provide 19.73% downside protection and a 13.92% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Dow Chemical has a current annual dividend yield of 3.78%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]