Lam Research (LRCX) 10/30/09 PriceWatch Alert With 10.24% Downside Protection

Posted: Friday, October 30, 2009 8:47 AM EDT

Lam Research (NasdaqNM: LRCX) closed yesterday at $35.14. 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 33.05 and resistance in the 36.21 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 Mar '10 35 covered call (LMQ CG) for a net debit in the $31.54 area. That is also the break even stock price for this trade. This covered call has a 141 day duration, provides 10.24% downside protection and a 10.97% assigned return rate for a 28.40% 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 15 Call (VPC AC) and selling the Mar '10 35 call (LMQ CG) for a $16.90 debit. The trade has a 141 day life and would provide 9.22% downside protection and an 18.34% assigned return rate for a 47.00% annualized return rate (for comparison purposes only). Lam Research does not pay dividends at this time. [FBB-Seven Summits Research]

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