Hewlett Packard (HPQ) 11/2/09 PriceWatch Alert Up To 2.84% Downside Protection

Posted: Monday, November 02, 2009 8:21 AM EDT
By: Market Intelligence Center Staff

Hewlett Packard (NYSE: HPQ) ended the last trading session at $47.46. So far the stock has hit a 52-week low of $25.39 and 52-week high of $49.20. Hewlett Packard stock has been showing support around 46.19 and resistance in the 49.63 range. Technical indicators for the stock are Bullish and S&P gives HPQ a very positive 5 STAR (out of 5) strong buy rating. HPQ appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 50 covered call (HPQ AJ) for a net debit in the $46.11 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 2.84% downside protection and an 8.44% assigned return rate for a 41.06% 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 HPQ Jan '11 30 Call (VHP AF) and selling the Jan '10 50 call (HPQ AJ) for a $17.55 debit. The trade has a 75 day life and would provide no downside protection and a 13.96% assigned return rate for a 68.00% annualized return rate (for comparison purposes only). Hewlett Packard has a current annual dividend yield of 0.68%. [ABR-Seven Summits Research]