Vmware Inc. (VMW) PriceWatch Alert With $29.77 Break Even

Posted: Monday, July 27, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Vmware Inc. (NYSE: VMW) ended the last trading session at $33.47. So far the stock has hit a 52-week low of $17.25 and 52-week high of $41.86. Vmware stock has been showing support around 31.60 and resistance in the 34.80 range. Technical indicators for the stock are Bullish and S&P gives VMW a weak 2 STAR (out of 5) sell rating. VMW appears on the Investors Observer Stocks In The News list. VMW reported earnings Wednesday afternoon, posting a second-quarter profit excluding items of 20 cents per share. Analysts had prediced a profit of 19 cents per share. For a hedged play on this stock, look at an Oct '09 32 covered call (MKT JP) for a net debit in the $29.77 area. That is also the break even stock price for this trade. This covered call has an 82 day duration, provides 11.05% downside protection and a 7.49% assigned return rate for a 33.34% 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 VMW Jan '11 7.50 Call (XJO AU) and selling the Oct '09 32 call (MKT JP) for a $22.40 debit. The trade has an 82 day life and would provide 10.67% downside protection and a 9.38% assigned return rate for a 42.00% annualized return rate (for comparison purposes only). Vmware does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]