International Business Machines (IBM) 10/27/09 PriceWatch Alert Support At Around $117.81

Posted: Tuesday, October 27, 2009 8:34 AM EDT
By: Market Intelligence Center Staff

International Business Machines (NYSE: IBM) closed yesterday at $120.11. So far the stock has hit a 52-week low of $69.50 and 52-week high of $128.61. International Business Machines stock has been showing support around 117.81 and resistance in the 123.59 range. Technical indicators for the stock are Bearish and S&P gives IBM a very positive 5 STAR (out of 5) strong buy rating. IBM appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '09 125 covered call (IBM LE) for a net debit in the $118.26 area. That is also the break even stock price for this trade. This covered call has a 53 day duration, provides 1.54% downside protection and a 5.70% assigned return rate for a 39.25% 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 IBM Jan '11 80 Call (VIB AP) and selling the Dec '09 125 call (IBM LE) for a $39.40 debit. The trade has a 53 day life and would provide 0.59% downside protection and a 14.21% assigned return rate for a 98.00% annualized return rate (for comparison purposes only). International Business Machines has a current annual dividend yield of 1.79%. [ATU-Seven Summits Research]