Supervalu (SVU) 11/3/09 PriceWatch Alert Targets 12.26% Downside Protection

Posted: Tuesday, November 03, 2009 8:33 AM EDT
By: Market Intelligence Center Staff

Supervalu (NYSE: SVU) closed yesterday at $15.91. So far the stock has hit a 52-week low of $8.59 and 52-week high of $20.38. Supervalu stock has been showing support around 15.50 and resistance in the 16.32 range. Technical indicators for the stock are Bullish and S&P gives SVU a weak 2 STAR (out of 5) sell rating. SVU appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 15 covered call (SVU DC) for a net debit in the $13.96 area. That is also the break even stock price for this trade. This covered call has a 165 day duration, provides 12.26% downside protection and a 7.45% assigned return rate for a 16.48% 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 SVU Jan '11 10 Call (VCK AB) and selling the Apr '10 15 call (SVU DC) for a $4.45 debit. The trade has a 165 day life and would provide 9.18% downside protection and a 12.36% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Supervalu has a current annual dividend yield of 4.31%. [ATU-Seven Summits Research]