Time Warner (TWX) 10/30/09 PriceWatch Alert Could Hit 27.26% Return

Posted: Friday, October 30, 2009 8:33 AM EDT
By: Market Intelligence Center Staff

Time Warner (NYSE: TWX) closed yesterday at $30.67. So far the stock has hit a 52-week low of $17.81 and 52-week high of $33.66. Time Warner stock has been showing support around 29.26 and resistance in the 31.46 range. Technical indicators for the stock are Bullish and S&P gives TWX a neutral 3 STAR (out of 5) hold rating. TWX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '09 30 covered call (AOE LD) for a net debit in the $28.92 area. That is also the break even stock price for this trade. This covered call has a 50 day duration, provides 5.71% downside protection and a 3.73% assigned return rate for a 27.26% 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 TWX Jan '11 15 Call (VAN AC) and selling the Dec '09 30 call (AOE LD) for a $13.85 debit. The trade has a 50 day life and would provide 5.93% downside protection and an 8.30% assigned return rate for a 61.00% annualized return rate (for comparison purposes only). Time Warner has a current annual dividend yield of 2.47%. [FBB-Seven Summits Research]