Avon Products (AVP) 11/3/09 PriceWatch Alert Up To 5.73% Downside Protection

Posted: Tuesday, November 03, 2009 8:16 AM EDT
By: Market Intelligence Center Staff

Avon Products (NYSE: AVP) closed yesterday at $32.30. So far the stock has hit a 52-week low of $14.40 and 52-week high of $35.82. Avon Products stock has been showing support around 31.44 and resistance in the 33.00 range. Technical indicators for the stock are Bearish and S&P gives AVP a neutral 3 STAR (out of 5) hold rating. AVP appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 32 covered call (AVP AK) for a net debit in the $30.45 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 5.73% downside protection and a 5.09% assigned return rate for a 25.11% 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 AVP Jan '11 22.50 Call (VVP AX) and selling the Jan '10 32 call (AVP AK) for an $8.90 debit. The trade has a 74 day life and would provide 2.79% downside protection and a 6.74% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). Avon Products has a current annual dividend yield of 2.58%. [ATU-Seven Summits Research]