Dow Chemical (DOW) PriceWatch Alert With $11.32 Break Even

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

Dow Chemical (NYSE: DOW) closed yesterday at $15.12. So far the stock has hit a 52-week low of $5.89 and 52-week high of $39.99. Dow Chemical stock has been showing support around 14.71 and resistance in the 15.95 range. Technical indicators for the stock are Bearish and S&P gives DOW a neutral 3 STAR (out of 5) hold rating. DOW appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 12.50 covered call (WDO AV) for a net debit in the $11.32 area. That is also the break even stock price for this trade. This covered call has a 194 day duration, provides 25.13% downside protection and a 10.42% assigned return rate for a 19.61% 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 DOW Jan '11 5 Call (VDO AA) and selling the Jan '10 12.50 call (WDO AV) for a $6.70 debit. The trade has a 194 day life and would provide 22.62% downside protection and an 11.94% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). Dow Chemical has a current annual dividend yield of 3.73%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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