Bed Bath and Beyond (BBBY) 11/2/09 PriceWatch Alert Targets 6.82% Downside Protection

Posted: Monday, November 02, 2009 8:32 AM EDT
By: Market Intelligence Center Staff

Bed Bath and Beyond (NasdaqNM: BBBY) ended the last trading session at $35.21. So far the stock has hit a 52-week low of $16.23 and 52-week high of $40.23. Bed Bath and Beyond stock has been showing support around 34.24 and resistance in the 36.80 range. Technical indicators for the stock are Bearish and S&P gives BBBY a weak 2 STAR (out of 5) sell rating. BBBY appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 35 covered call (BHQ AG) for a net debit in the $32.81 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 6.82% downside protection and a 6.67% assigned return rate for a 32.48% 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 BBBY Jan '11 15 Call (ONY AC) and selling the Jan '10 35 call (BHQ AG) for an $18.75 debit. The trade has a 75 day life and would provide 4.15% downside protection and a 6.67% assigned return rate for a 32.00% annualized return rate (for comparison purposes only). Bed Bath and Beyond does not pay dividends at this time. [ABR-Seven Summits Research]