Sony (SNE) 11/3/09 PriceWatch Alert With $23.80 Break Even

Posted: Tuesday, November 03, 2009 8:26 AM EDT

Sony (NYSE: SNE) closed yesterday at $28.90. So far the stock has hit a 52-week low of $15.64 and 52-week high of $30.82. Sony stock has been showing support around 28.08 and resistance in the 29.80 range. Technical indicators for the stock are Bullish and S&P gives SNE a weak 2 STAR (out of 5) sell rating. SNE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 25 covered call (SNE DE) for a net debit in the $23.80 area. That is also the break even stock price for this trade. This covered call has a 165 day duration, provides 17.65% downside protection and a 5.04% assigned return rate for an 11.15% 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 SNE Jan '11 10 Call (VY AB) and selling the Apr '10 25 call (SNE DE) for a $14.05 debit. The trade has a 165 day life and would provide 16.78% downside protection and a 6.76% assigned return rate for a 15.00% annualized return rate (for comparison purposes only). Sony has a current annual dividend yield of 0.39%. [ATU-Seven Summits Research]

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