Sysco (SYY) 10/28/09 PriceWatch Alert At $26.46 Break Even

Posted: Wednesday, October 28, 2009 8:30 AM EDT
By: Market Intelligence Center Staff

Sysco (NYSE: SYY) closed yesterday at $27.61. So far the stock has hit a 52-week low of $19.39 and 52-week high of $27.72. Sysco stock has been showing support around 26.96 and resistance in the 28.04 range. Technical indicators for the stock are Bullish and S&P gives SYY a neutral 3 STAR (out of 5) hold rating. SYY appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 27.50 covered call (SYY AY) for a net debit in the $26.46 area. That is also the break even stock price for this trade. This covered call has an 80 day duration, provides 4.17% downside protection and a 3.93% assigned return rate for a 17.93% 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 SYY Jan '11 20 Call (ZHK AD) and selling the Jan '10 27.50 call (SYY AY) for a $6.70 debit. The trade has an 80 day life and would provide 3.30% downside protection and an 11.94% assigned return rate for a 54.00% annualized return rate (for comparison purposes only). Sysco has a current annual dividend yield of 3.53%. [WBA-Seven Summits Research]