Limited Brands (LTD) 11/2/09 PriceWatch Alert Targets 15.79% Return

Posted: Monday, November 02, 2009 8:02 AM EDT

Limited Brands (NYSE: LTD) ended the last trading session at $17.60. So far the stock has hit a 52-week low of $5.98 and 52-week high of $19.99. Limited Brands stock has been showing support around 17.11 and resistance in the 18.51 range. Technical indicators for the stock are Bullish and S&P gives LTD a neutral 3 STAR (out of 5) hold rating. LTD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a May '10 15 covered call (LTD EC) for a net debit in the $13.80 area. That is also the break even stock price for this trade. This covered call has a 201 day duration, provides 21.59% downside protection and an 8.70% assigned return rate for a 15.79% 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 LTD Jan '11 5 Call (VLD AA) and selling the May '10 15 call (LTD EC) for an $8.65 debit. The trade has a 201 day life and would provide 22.44% downside protection and a 15.61% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Limited Brands has a current annual dividend yield of 3.52%. [ABR-Seven Summits Research]

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