PNC Financial (PNC) 10/30/09 PriceWatch Alert Up To 8.80% Downside Protection

Posted: Friday, October 30, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

PNC Financial (NYSE: PNC) closed yesterday at $52.29. So far the stock has hit a 52-week low of $16.20 and 52-week high of $74.68. PNC Financial stock has been showing support around 48.86 and resistance in the 54.18 range. Technical indicators for the stock are Bullish and S&P gives PNC a positive 4 STAR (out of 5) buy rating. PNC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Dec '09 50 covered call (PNC LJ) for a net debit in the $47.69 area. That is also the break even stock price for this trade. This covered call has a 50 day duration, provides 8.80% downside protection and a 4.84% assigned return rate for a 35.36% 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 PNC Jan '11 17.50 Call (VSM AW) and selling the Dec '09 50 call (PNC LJ) for a $30.10 debit. The trade has a 50 day life and would provide 8.97% downside protection and a 7.97% assigned return rate for a 58.00% annualized return rate (for comparison purposes only). PNC Financial has a current annual dividend yield of 0.79%. [FBB-Seven Summits Research]