Tyco International (TYC) 11/3/09 PriceWatch Alert With 7.31% Downside Protection

Posted: Tuesday, November 03, 2009 8:43 AM EDT
By: Market Intelligence Center Staff

Tyco International (NYSE: TYC) closed yesterday at $33.53. So far the stock has hit a 52-week low of $15.17 and 52-week high of $36.11. Tyco International stock has been showing support around 32.42 and resistance in the 34.58 range. Technical indicators for the stock are Bearish and S&P gives TYC a neutral 3 STAR (out of 5) hold rating. TYC appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 32.50 covered call (TYE AZ) for a net debit in the $31.08 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 7.31% downside protection and a 4.57% assigned return rate for a 22.54% 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 TYC Jan '11 17.50 Call (VPA AW) and selling the Jan '10 32.50 call (TYE AZ) for a $14.00 debit. The trade has a 74 day life and would provide 6.05% downside protection and a 7.14% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). Tyco International has a current annual dividend yield of 2.53%. [ATU-Seven Summits Research]