National Semiconductor (NSM) 10/27/09 PriceWatch Alert Up To 11.32% Downside Protection

Posted: Tuesday, October 27, 2009 8:23 AM EDT
By: Market Intelligence Center Staff

National Semiconductor (NYSE: NSM) closed yesterday at $13.69. So far the stock has hit a 52-week low of $9.02 and 52-week high of $16.20. National Semiconductor stock has been showing support around 13.27 and resistance in the 14.31 range. Technical indicators for the stock are Bearish and S&P gives NSM a positive 4 STAR (out of 5) buy rating. NSM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Feb '10 13 covered call (NSM BM) for a net debit in the $12.14 area. That is also the break even stock price for this trade. This covered call has an 116 day duration, provides 11.32% downside protection and a 7.08% assigned return rate for a 22.29% 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 NSM Jan '11 5 Call (VSN AA) and selling the Feb '10 13 call (NSM BM) for a $7.50 debit. The trade has an 116 day life and would provide 8.69% downside protection and a 6.67% assigned return rate for a 21.00% annualized return rate (for comparison purposes only). National Semiconductor has a current annual dividend yield of 2.26%. [ATU-Seven Summits Research]