Procter and Gamble (PG) PriceWatch Alert With 3.33% Downside Protection

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

Procter and Gamble (NYSE: PG) closed yesterday at $51.11. So far the stock has hit a 52-week low of $43.93 and 52-week high of $73.57. Procter and Gamble stock has been showing support around 50.14 and resistance in the 52.32 range. Technical indicators for the stock are Neutral and S&P gives PG a positive 4 STAR (out of 5) buy rating. PG appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Oct '09 52.50 covered call (PG JX) for a net debit in the $49.41 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 3.33% downside protection and a 6.25% assigned return rate for a 22.16% 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 PG Jan '11 35 Call (VPG AG) and selling the Oct '09 52.50 call (PG JX) for a $14.90 debit. The trade has a 103 day life and would provide 2.37% downside protection and a 17.45% assigned return rate for a 62.00% annualized return rate (for comparison purposes only). Procter and Gamble has a current annual dividend yield of 3.37%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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