The Travelers Companies Inc. (TRV) 11/3/09 PriceWatch Alert Technicals Showing Bullish

Posted: Tuesday, November 03, 2009 8:34 AM EDT

The Travelers Companies Inc. (NYSE: TRV) closed yesterday at $50.20. So far the stock has hit a 52-week low of $33.07 and 52-week high of $52.09. Travelers stock has been showing support around 49.07 and resistance in the 51.81 range. Technical indicators for the stock are Bullish and S&P gives TRV a very positive 5 STAR (out of 5) strong buy rating. TRV appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 50 covered call (TRV AJ) for a net debit in the $47.50 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 5.38% downside protection and a 5.26% assigned return rate for a 25.96% 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 TRV Jan '11 30 Call (OWX AF) and selling the Jan '10 50 call (TRV AJ) for an $18.90 debit. The trade has a 74 day life and would provide 2.59% downside protection and a 5.82% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). Travelers has a current annual dividend yield of 2.31%. [ATU-Seven Summits Research]

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