Bank of New York Mellon (BK) 10/21/09 PriceWatch Alert With 6.06% Downside Protection

Posted: Wednesday, October 21, 2009 8:12 AM EDT
By: Market Intelligence Center Staff

Bank of New York Mellon (NYSE: BK) closed yesterday at $28.90. So far the stock has hit a 52-week low of $15.44 and 52-week high of $34.78. Bank of New York Mellon stock has been showing support around 27.59 and resistance in the 30.21 range. Technical indicators for the stock are Bullish and S&P gives BK a positive 4 STAR (out of 5) buy rating. BK appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 29 covered call (BK AW) for a net debit in the $27.15 area. That is also the break even stock price for this trade. This covered call has an 87 day duration, provides 6.06% downside protection and a 6.81% assigned return rate for a 28.59% 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 BK Jan '11 10 Call (OUY AB) and selling the Jan '10 29 call (BK AW) for a $17.70 debit. The trade has an 87 day life and would provide 4.15% downside protection and a 7.34% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). Bank of New York Mellon has a current annual dividend yield of 1.32%. [WBA-Seven Summits Research]