Fifth Third Bancorp (FITB) 10/21/09 PriceWatch Alert With 24.57% Downside Protection

Posted: Wednesday, October 21, 2009 8:25 AM EDT

Fifth Third Bancorp (NasdaqNM: FITB) closed yesterday at $10.58. So far the stock has hit a 52-week low of $1.01 and 52-week high of $12.95. Fifth Third Bancorp stock has been showing support around 9.73 and resistance in the 11.09 range. Technical indicators for the stock are Bullish and S&P gives FITB a neutral 3 STAR (out of 5) hold rating. FITB appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a May '10 9 covered call (FTQ EI) for a net debit in the $7.98 area. That is also the break even stock price for this trade. This covered call has a 213 day duration, provides 24.57% downside protection and a 12.78% assigned return rate for a 21.90% 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 FITB Jan '11 5 Call (OJH AA) and selling the May '10 9 call (FTQ EI) for a $3.50 debit. The trade has a 213 day life and would provide 19.66% downside protection and a 14.29% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). Fifth Third Bancorp has a current annual dividend yield of 0.40%. [WBA-Seven Summits Research]

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