Eastman Chemical (EMN) 11/4/09 PriceWatch Alert Targets 6.71% Downside Protection

Posted: Wednesday, November 04, 2009 8:13 AM EDT

Eastman Chemical (NYSE: EMN) closed yesterday at $55.16. So far the stock has hit a 52-week low of $17.76 and 52-week high of $57.89. Eastman Chemical stock has been showing support around 51.90 and resistance in the 57.08 range. Technical indicators for the stock are Bullish and S&P gives EMN a positive 4 STAR (out of 5) buy rating. EMN appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 55 covered call (EMN AK) for a net debit in the $51.46 area. That is also the break even stock price for this trade. This covered call has a 73 day duration, provides 6.71% downside protection and a 6.88% assigned return rate for a 34.40% 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 EMN Jan '11 35 Call (VWZ AG) and selling the Jan '10 55 call (EMN AK) for a $17.80 debit. The trade has a 73 day life and would provide 4.28% downside protection and a 12.36% assigned return rate for a 62.00% annualized return rate (for comparison purposes only). Eastman Chemical has a current annual dividend yield of 3.35%. [WBA-Seven Summits Research]

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