Electronic Arts (ERTS) 11/4/09 PriceWatch Alert With Support Around $17.32

Posted: Wednesday, November 04, 2009 8:19 AM EDT

Electronic Arts (NasdaqNM: ERTS) closed yesterday at $17.77. So far the stock has hit a 52-week low of $14.24 and 52-week high of $24.90. Electronic Arts stock has been showing support around 17.32 and resistance in the 18.28 range. Technical indicators for the stock are Bearish and S&P gives ERTS a weak 2 STAR (out of 5) sell rating. ERTS appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '10 16 covered call (EZQ CP) for a net debit in the $14.82 area. That is also the break even stock price for this trade. This covered call has a 136 day duration, provides 16.60% downside protection and a 7.96% assigned return rate for a 21.37% 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 ERTS Jan '11 5 Call (VZW AA) and selling the Mar '10 16 call (EZQ CP) for a $10.25 debit. The trade has a 136 day life and would provide 14.18% downside protection and a 7.32% assigned return rate for a 20.00% annualized return rate (for comparison purposes only). Electronic Arts does not pay dividends at this time. [WBA-Seven Summits Research]

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