Novellus Systems (NVLS) 10/27/09 PriceWatch Alert With $20.11 Break Even

Posted: Tuesday, October 27, 2009 8:41 AM EDT
By: Market Intelligence Center Staff

Novellus Systems (NasdaqNM: NVLS) closed yesterday at $22.31. So far the stock has hit a 52-week low of $10.26 and 52-week high of $23.17. Novellus Systems stock has been showing support around 21.70 and resistance in the 23.22 range. Technical indicators for the stock are Bullish and S&P gives NVLS a positive 4 STAR (out of 5) buy rating. NVLS appears on the Investors Observer Stocks In The News list. NVLS reported a third-quarter loss of 3 cents per share Thursday morning, better than the 4-cent loss that analysts had been expecting to see. For a hedged play on this stock, look at a Jan '10 21 covered call (NLQ AS) for a net debit in the $20.11 area. That is also the break even stock price for this trade. This covered call has an 81 day duration, provides 9.86% downside protection and a 4.43% assigned return rate for a 19.94% 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 NVLS Jan '11 5 Call (OTN AA) and selling the Jan '10 21 call (NLQ AS) for a $15.65 debit. The trade has an 81 day life and would provide 7.44% downside protection and a 2.24% assigned return rate for a 10.00% annualized return rate (for comparison purposes only). Novellus Systems does not pay dividends at this time. [ATU-Seven Summits Research]