Limited Brands (LTD) 10/26/09 PriceWatch Alert Targets 14.57% Downside Protection

Posted: Monday, October 26, 2009 8:20 AM EDT
By: Market Intelligence Center Staff

Limited Brands (NYSE: LTD) ended the last trading session at $19.22. So far the stock has hit a 52-week low of $5.98 and 52-week high of $19.75. Limited Brands stock has been showing support around 18.83 and resistance in the 19.95 range. Technical indicators for the stock are Bullish and S&P gives LTD a neutral 3 STAR (out of 5) hold rating. LTD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Feb '10 17.50 covered call (LTD BW) for a net debit in the $16.42 area. That is also the break even stock price for this trade. This covered call has an 117 day duration, provides 14.57% downside protection and a 6.58% assigned return rate for a 20.52% 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 LTD Jan '11 5 Call (VLD AA) and selling the Feb '10 17.50 call (LTD BW) for an $11.80 debit. The trade has an 117 day life and would provide 12.59% downside protection and a 5.93% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). Limited Brands has a current annual dividend yield of 3.19%. [ABR-Seven Summits Research]