Texas Instruments (TXN) 10/22/09 PriceWatch Alert Targets 8.30% Downside Protection

Posted: Thursday, October 22, 2009 8:23 AM EDT

Texas Instruments (NYSE: TXN) closed yesterday at $23.00. So far the stock has hit a 52-week low of $13.38 and 52-week high of $25.35. Texas Instruments stock has been showing support around 22.28 and resistance in the 24.14 range. Technical indicators for the stock are Bearish and S&P gives TXN a positive 4 STAR (out of 5) buy rating. TXN appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 23 covered call (TXN DI) for a net debit in the $21.09 area. That is also the break even stock price for this trade. This covered call has a 177 day duration, provides 8.30% downside protection and a 9.06% assigned return rate for an 18.68% 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 TXN Jan '11 15 Call (VXT AC) and selling the Apr '10 23 call (TXN DI) for a $6.49 debit. The trade has a 177 day life and would provide 6.57% downside protection and a 23.27% assigned return rate for a 48.00% annualized return rate (for comparison purposes only). Texas Instruments has a current annual dividend yield of 1.87%. [THA-Seven Summits Research]

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