Novellus Systems (NVLS) 9/10/09 PriceWatch Alert Up To 14.08% Downside Protection

Posted: Thursday, September 10, 2009 8:30 AM EDT
By: Market Intelligence Center Staff

Novellus Systems (NasdaqNM: NVLS) closed yesterday at $19.89. So far the stock has hit a 52-week low of $10.26 and 52-week high of $22.05. Novellus Systems stock has been showing support around 19.27 and resistance in the 20.21 range. Technical indicators for the stock are Bullish and S&P gives NVLS a positive 4 STAR (out of 5) buy rating. NVLS appears on the Investors Observer Stocks In The News list. NVLS upped the low end of its third-quarter EPS guidance Friday. NVLS now expects to report a loss of 9 cents per share to break-even for the quarter. NVLS had previously forecast a loss of 15 cents per share to break-even. Analysts are expecting a loss of 6 cents per share. For a hedged play on this stock, look at a Mar '10 19 covered call (NLQ CR) for a net debit in the $17.09 area. That is also the break even stock price for this trade. This covered call has a 191 day duration, provides 14.08% downside protection and an 11.18% assigned return rate for a 21.36% 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 NVLS Jan '11 10 Call (OTN AB) and selling the Mar '10 19 call (NLQ CR) for a $7.65 debit. The trade has a 191 day life and would provide 11.26% downside protection and a 17.65% assigned return rate for a 34.00% annualized return rate (for comparison purposes only). Novellus Systems does not pay dividends at this time. [THA-Seven Summits Research] For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo