Lockheed Martin (LMT) 10/26/09 PriceWatch Alert With 1.94% Downside Protection

Posted: Monday, October 26, 2009 8:27 AM EDT
By: Market Intelligence Center Staff

Lockheed Martin (NYSE: LMT) ended the last trading session at $72.19. So far the stock has hit a 52-week low of $57.41 and 52-week high of $87.06. Lockheed Martin stock has been showing support around 70.91 and resistance in the 73.33 range. Technical indicators for the stock are Bearish and S&P gives LMT a weak 2 STAR (out of 5) sell rating. LMT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '09 75 covered call (LMT LO) for a net debit in the $70.79 area. That is also the break even stock price for this trade. This covered call has a 54 day duration, provides 1.94% downside protection and a 5.95% assigned return rate for a 40.20% 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 LMT Jan '11 50 Call (ORD AJ) and selling the Dec '09 75 call (LMT LO) for a $21.10 debit. The trade has a 54 day life and would provide 1.51% downside protection and an 18.48% assigned return rate for a 125.00% annualized return rate (for comparison purposes only). Lockheed Martin has a current annual dividend yield of 3.27%. [ABR-Seven Summits Research]