Analog Devices Inc. (ADI) 11/2/09 PriceWatch Alert Targets 9.36% Downside Protection

Posted: Monday, November 02, 2009 8:02 AM EDT
By: Market Intelligence Center Staff

Analog Devices Inc. (NYSE: ADI) ended the last trading session at $25.63. So far the stock has hit a 52-week low of $15.29 and 52-week high of $29.71. Analog Devices stock has been showing support around 24.97 and resistance in the 26.77 range. Technical indicators for the stock are Bearish and S&P gives ADI a neutral 3 STAR (out of 5) hold rating. ADI appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '10 25 covered call (ADI CE) for a net debit in the $23.23 area. That is also the break even stock price for this trade. This covered call has a 138 day duration, provides 9.36% downside protection and a 7.62% assigned return rate for a 20.15% 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 ADI Jan '11 17.50 Call (VIK AW) and selling the Mar '10 25 call (ADI CE) for a $6.65 debit. The trade has a 138 day life and would provide 5.77% downside protection and a 12.78% assigned return rate for a 34.00% annualized return rate (for comparison purposes only). Analog Devices has a current annual dividend yield of 3.10%. [ABR-Seven Summits Research]