Textron (TXT) Gains Over 2% Yesterday And Stock Has Positive 4 STARs S&P Rating With Neutral Technicals

Posted: Wednesday, November 04, 2009 8:21 AM EDT
By: Market Intelligence Center Staff

Textron (NYSE: TXT) closed yesterday at $18.51. So far the stock has hit a 52-week low of $3.57 and 52-week high of $20.99. Textron stock has been showing support around 17.21 and resistance in the 19.19 range. Technical indicators for the stock are Neutral and S&P gives TXT a positive 4 STAR (out of 5) buy rating. TXT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '10 16 covered call (TXY CL) for a net debit in the $14.91 area. That is also the break even stock price for this trade. This covered call has a 136 day duration, provides 19.45% downside protection and a 7.31% assigned return rate for a 19.62% 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 TXT Jan '11 5 Call (XUD AA) and selling the Mar '10 16 call (TXY CL) for a $10.00 debit. The trade has a 136 day life and would provide 18.96% downside protection and a 10.00% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Textron has a current annual dividend yield of 0.45%. [WBA-Seven Summits Research]