Ross Stores Inc. (ROST) 11/3/09 PriceWatch Alert Bearish Price Movement

Posted: Tuesday, November 03, 2009 8:44 AM EDT

Ross Stores Inc. (NasdaqNM: ROST) closed yesterday at $44.79. So far the stock has hit a 52-week low of $21.70 and 52-week high of $50.50. Ross Stores stock has been showing support around 43.54 and resistance in the 45.84 range. Technical indicators for the stock are Bearish and S&P gives ROST a positive 4 STAR (out of 5) buy rating. ROST appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Feb '10 42.50 covered call (REQ BT) for a net debit in the $40.59 area. That is also the break even stock price for this trade. This covered call has a 109 day duration, provides 9.38% downside protection and a 4.71% assigned return rate for a 15.76% 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 ROST Jan '11 25 Call (VJR AE) and selling the Feb '10 42.50 call (REQ BT) for a $16.20 debit. The trade has a 109 day life and would provide 8.02% downside protection and an 8.02% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Ross Stores has a current annual dividend yield of 0.99%. [ATU-Seven Summits Research]

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