Linear Technology (LLTC) 11/3/09 PriceWatch Alert With 7.51% Downside Protection

Posted: Tuesday, November 03, 2009 8:37 AM EDT
By: Market Intelligence Center Staff

Linear Technology (NasdaqNM: LLTC) closed yesterday at $25.98. So far the stock has hit a 52-week low of $17.69 and 52-week high of $28.99. Linear Technology stock has been showing support around 25.31 and resistance in the 26.47 range. Technical indicators for the stock are Bearish and S&P gives LLTC a very positive 5 STAR (out of 5) strong buy rating. LLTC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 25 covered call (LLQ AE) for a net debit in the $24.03 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 7.51% downside protection and a 4.04% assigned return rate for a 19.91% 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 LLTC Jan '11 15 Call (OJQ AC) and selling the Jan '10 25 call (LLQ AE) for a $9.45 debit. The trade has a 74 day life and would provide 5.89% downside protection and a 5.82% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). Linear Technology has a current annual dividend yield of 3.31%. [ATU-Seven Summits Research]