A T and T (T) 11/3/09 PriceWatch Alert With $23.72 Break Even

Posted: Tuesday, November 03, 2009 8:41 AM EDT

A T and T (NYSE: T) closed yesterday at $25.59. So far the stock has hit a 52-week low of $21.44 and 52-week high of $30.65. A T and T stock has been showing support around 24.58 and resistance in the 26.42 range. Technical indicators for the stock are Bearish and S&P gives T a very positive 5 STAR (out of 5) strong buy rating. T appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 25 covered call (T DE) for a net debit in the $23.72 area. That is also the break even stock price for this trade. This covered call has a 165 day duration, provides 7.31% downside protection and a 5.40% assigned return rate for an 11.94% 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 T Jan '11 20 Call (VFE AD) and selling the Apr '10 25 call (T DE) for a $4.18 debit. The trade has a 165 day life and would provide 5.51% downside protection and a 19.62% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). A T and T has a current annual dividend yield of 6.25%. [ATU-Seven Summits Research]

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