Time Warner (TWX) PriceWatch Alert Targets 11.98% Downside Protection

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

Time Warner (NYSE: TWX) closed yesterday at $24.21. So far the stock has hit a 52-week low of $17.81 and 52-week high of $50.70. Time Warner stock has been showing support around 23.66 and resistance in the 25.30 range. Technical indicators for the stock are Bullish and S&P gives TWX a neutral 3 STAR (out of 5) hold rating. TWX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 24 covered call (TWX AX) for a net debit in the $21.31 area. That is also the break even stock price for this trade. This covered call has a 194 day duration, provides 11.98% downside protection and a 12.62% assigned return rate for a 23.75% 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 TWX Jan '11 12.50 Call (VAN AV) and selling the Jan '10 24 call (TWX AX) for a $9.45 debit. The trade has a 194 day life and would provide 9.33% downside protection and a 21.69% assigned return rate for a 41.00% annualized return rate (for comparison purposes only). Time Warner has a current annual dividend yield of 2.96%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]