SunTrust Banks (STI) PriceWatch Alert Targets 21.09% Return

Posted: Monday, July 06, 2009 8:07 AM EDT

SunTrust Banks (NYSE: STI) closed yesterday at $16.14. So far the stock has hit a 52-week low of $6.00 and 52-week high of $64.00. SunTrust Banks stock has been showing support around 15.73 and resistance in the 16.59 range. Technical indicators for the stock are Bullish and S&P gives STI a neutral 3 STAR (out of 5) hold rating. STI appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 12.50 covered call (SFJ AV) for a net debit in the $11.24 area. That is also the break even stock price for this trade. This covered call has a 194 day duration, provides 30.36% downside protection and an 11.21% assigned return rate for a 21.09% 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 STI Jan '11 5 Call (VNJ AA) and selling the Jan '10 12.50 call (SFJ AV) for a $6.85 debit. The trade has a 194 day life and would provide 26.58% downside protection and a 9.49% assigned return rate for an 18.00% annualized return rate (for comparison purposes only). SunTrust Banks has a current annual dividend yield of 2.45%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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