Tiffany (TIF) 11/3/09 PriceWatch Alert Up To 7.43% Downside Protection

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

Tiffany (NYSE: TIF) closed yesterday at $39.71. So far the stock has hit a 52-week low of $16.70 and 52-week high of $42.62. Tiffany stock has been showing support around 38.36 and resistance in the 41.02 range. Technical indicators for the stock are Bullish and S&P gives TIF a neutral 3 STAR (out of 5) hold rating. TIF appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Feb '10 41 covered call (TIT BD) for a net debit in the $36.76 area. That is also the break even stock price for this trade. This covered call has a 109 day duration, provides 7.43% downside protection and an 11.53% assigned return rate for a 38.62% 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 TIF Jan '11 22.50 Call (VFF AX) and selling the Feb '10 41 call (TIT BD) for a $15.15 debit. The trade has a 109 day life and would provide 5.19% downside protection and a 22.11% assigned return rate for a 74.00% annualized return rate (for comparison purposes only). Tiffany has a current annual dividend yield of 1.67%. [ATU-Seven Summits Research]

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