Goodyear Tire and Rubber (GT) 10/22/09 PriceWatch Alert Technicals Showing Bullish

Posted: Thursday, October 22, 2009 8:06 AM EDT

Goodyear Tire and Rubber (NYSE: GT) closed yesterday at $17.35. So far the stock has hit a 52-week low of $3.17 and 52-week high of $18.84. Goodyear stock has been showing support around 16.90 and resistance in the 18.08 range. Technical indicators for the stock are Bullish and S&P gives GT a neutral 3 STAR (out of 5) hold rating. GT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 15 covered call (GT DC) for a net debit in the $13.65 area. That is also the break even stock price for this trade. This covered call has a 177 day duration, provides 21.33% downside protection and a 9.89% assigned return rate for a 20.39% 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 GT Jan '11 2.50 Call (VYR AZ) and selling the Apr '10 15 call (GT DC) for an $11.45 debit. The trade has a 177 day life and would provide 19.60% downside protection and a 9.17% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). Goodyear does not pay dividends at this time. [THA-Seven Summits Research]

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