Goodyear Tire and Rubber (GT) 10/27/09 PriceWatch Alert Up To 19.63% Return

Posted: Tuesday, October 27, 2009 8:29 AM EDT
By: Market Intelligence Center Staff

Goodyear Tire and Rubber (NYSE: GT) closed yesterday at $17.23. So far the stock has hit a 52-week low of $3.17 and 52-week high of $18.84. Goodyear stock has been showing support around 16.32 and resistance in the 18.68 range. Technical indicators for the stock are Bullish and S&P gives GT a neutral 3 STAR (out of 5) hold rating. GT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 15 covered call (GT DC) for a net debit in the $13.73 area. That is also the break even stock price for this trade. This covered call has a 172 day duration, provides 20.31% downside protection and a 9.25% assigned return rate for a 19.63% 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 GT Jan '11 5 Call (VYR AA) and selling the Apr '10 15 call (GT DC) for a $9.25 debit. The trade has a 172 day life and would provide 17.30% downside protection and an 8.11% assigned return rate for a 17.00% annualized return rate (for comparison purposes only). Goodyear does not pay dividends at this time. [ATU-Seven Summits Research]