Limited Brands (LTD) PriceWatch Alert Targets 15.99% Return

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

Limited Brands (NYSE: LTD) closed yesterday at $11.97. So far the stock has hit a 52-week low of $5.98 and 52-week high of $22.16. Limited Brands stock has been showing support around 11.50 and resistance in the 12.50 range. Technical indicators for the stock are Bullish and S&P gives LTD a neutral 3 STAR (out of 5) hold rating. LTD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Feb '10 10 covered call (LTD BB) for a net debit in the $9.07 area. That is also the break even stock price for this trade. This covered call has a 234 day duration, provides 24.23% downside protection and a 10.25% assigned return rate for a 15.99% 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 LTD Jan '11 5 Call (VLD AA) and selling the Feb '10 10 call (LTD BB) for a $4.25 debit. The trade has a 234 day life and would provide 22.72% downside protection and a 17.65% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Limited Brands has a current annual dividend yield of 5.13%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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