RadioShack (RSH) 11/4/09 PriceWatch Alert Up To 18.66% Downside Protection

Posted: Wednesday, November 04, 2009 8:13 AM EDT
By: Market Intelligence Center Staff

RadioShack (NYSE: RSH) closed yesterday at $17.15. So far the stock has hit a 52-week low of $6.47 and 52-week high of $18.33. RadioShack stock has been showing support around 16.18 and resistance in the 17.82 range. Technical indicators for the stock are Bullish and S&P gives RSH a weak 2 STAR (out of 5) sell rating. RSH appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 15 covered call (RSH DC) for a net debit in the $13.95 area. That is also the break even stock price for this trade. This covered call has a 164 day duration, provides 18.66% downside protection and a 7.53% assigned return rate for a 16.75% 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 RSH Jan '11 5 Call (VJY AA) and selling the Apr '10 15 call (RSH DC) for an $8.65 debit. The trade has a 164 day life and would provide 20.41% downside protection and a 15.61% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). RadioShack has a current annual dividend yield of 1.48%. [WBA-Seven Summits Research]