Salesforce.com (CRM) PriceWatch Alert Targets 9.79% Downside Protection

Posted: Tuesday, August 18, 2009 8:28 AM EDT
By: Market Intelligence Center Staff

Salesforce.com (NYSE: CRM) closed yesterday at $44.94. So far the stock has hit a 52-week low of $20.82 and 52-week high of $66.99. Salesforce.com stock has been showing support around 43.72 and resistance in the 47.20 range. Technical indicators for the stock are Bullish and S&P gives CRM a neutral 3 STAR (out of 5) hold rating. CRM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Nov '09 45 covered call (CRM KI) for a net debit in the $40.54 area. That is also the break even stock price for this trade. This covered call has a 95 day duration, provides 9.79% downside protection and an 11.00% assigned return rate for a 42.27% 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 CRM Jan '11 15 Call (ZDB AC) and selling the Nov '09 45 call (CRM KI) for a $26.70 debit. The trade has a 95 day life and would provide 7.21% downside protection and a 12.36% assigned return rate for a 47.00% annualized return rate (for comparison purposes only). Salesforce.com 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]