Safeway (SWY) PriceWatch Alert At $16.52 Break Even

Posted: Monday, July 06, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Safeway (NYSE: SWY) closed yesterday at $19.52. So far the stock has hit a 52-week low of $17.19 and 52-week high of $30.09. Safeway stock has been showing support around 18.97 and resistance in the 20.61 range. Technical indicators for the stock are Bearish and S&P gives SWY a weak 2 STAR (out of 5) sell rating. SWY appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '09 17.50 covered call (SWY LW) for a net debit in the $16.52 area. That is also the break even stock price for this trade. This covered call has a 166 day duration, provides 15.37% downside protection and a 5.93% assigned return rate for a 13.04% 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 SWY Jan '11 10 Call (VYW AB) and selling the Dec '09 17.50 call (SWY LW) for a $6.95 debit. The trade has a 166 day life and would provide 13.17% downside protection and a 7.91% assigned return rate for a 17.00% annualized return rate (for comparison purposes only). Safeway has a current annual dividend yield of 1.95%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]