Sysco (SYY) 11/3/09 PriceWatch Alert With 9.62% Downside Protection

Posted: Tuesday, November 03, 2009 8:38 AM EDT

Sysco (NYSE: SYY) closed yesterday at $26.50. So far the stock has hit a 52-week low of $19.39 and 52-week high of $27.85. Sysco stock has been showing support around 25.77 and resistance in the 27.09 range. Technical indicators for the stock are Bullish and S&P gives SYY a neutral 3 STAR (out of 5) hold rating. SYY appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a May '10 25 covered call (SYY EE) for a net debit in the $23.95 area. That is also the break even stock price for this trade. This covered call has a 200 day duration, provides 9.62% downside protection and a 4.38% assigned return rate for an 8.00% 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 SYY Jan '11 17.50 Call (ZHK AW) and selling the May '10 25 call (SYY EE) for a $6.65 debit. The trade has a 200 day life and would provide 8.87% downside protection and a 12.78% assigned return rate for a 23.00% annualized return rate (for comparison purposes only). Sysco has a current annual dividend yield of 3.50%. [ATU-Seven Summits Research]

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