Dow Chemical (DOW) PriceWatch Alert Targets 21.11% Return

Posted: Wednesday, July 01, 2009 8:07 AM EDT

Dow Chemical (NYSE: DOW) closed yesterday at $16.14. 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 15.71 and resistance in the 16.59 range. Technical indicators for the stock are Bullish 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 $12.74 area. That is also the break even stock price for this trade. This covered call has a 171 day duration, provides 21.07% downside protection and a 9.89% assigned return rate for a 21.11% 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 $7.85 debit. The trade has a 171 day life and would provide 20.38% downside protection and a 14.65% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). Dow Chemical has a current annual dividend yield of 3.74%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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