Yum Brands (YUM) PriceWatch Alert Technicals Showing Bullish

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

Yum Brands (NYSE: YUM) closed yesterday at $34.25. So far the stock has hit a 52-week low of $21.50 and 52-week high of $40.25. Yum Brands stock has been showing support around 33.82 and resistance in the 35.12 range. Technical indicators for the stock are Bullish and S&P gives YUM a very weak 1 STAR (out of 5) strong sell rating. YUM appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Oct '09 35 covered call (YUM JG) for a net debit in the $32.00 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 6.57% downside protection and a 9.38% assigned return rate for a 33.22% 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 YUM Jan '11 20 Call (VRJ AD) and selling the Oct '09 35 call (YUM JG) for a $12.90 debit. The trade has a 103 day life and would provide 3.94% downside protection and a 16.28% assigned return rate for a 58.00% annualized return rate (for comparison purposes only). Yum Brands has a current annual dividend yield of 2.28%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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