Lam Research (LRCX) 10/28/09 PriceWatch Alert Could Hit 14.49% Return

Posted: Wednesday, October 28, 2009 8:22 AM EDT

Lam Research (NasdaqNM: LRCX) closed yesterday at $34.65. So far the stock has hit a 52-week low of $14.72 and 52-week high of $38.51. Lam Research stock has been showing support around 33.18 and resistance in the 37.30 range. Technical indicators for the stock are Bullish and S&P gives LRCX a neutral 3 STAR (out of 5) hold rating. LRCX appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jun '10 30 covered call (LMQ FF) for a net debit in the $27.45 area. That is also the break even stock price for this trade. This covered call has a 234 day duration, provides 20.78% downside protection and a 9.29% assigned return rate for a 14.49% 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 LRCX Jan '11 10 Call (VPC AB) and selling the Jun '10 30 call (LMQ FF) for an $18.25 debit. The trade has a 234 day life and would provide 18.47% downside protection and a 9.59% assigned return rate for a 15.00% annualized return rate (for comparison purposes only). Lam Research does not pay dividends at this time. [WBA-Seven Summits Research]

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