SAP AG (SAP) 11/4/09 PriceWatch Alert Targets 24.52% Return

Posted: Wednesday, November 04, 2009 8:31 AM EDT
By: Market Intelligence Center Staff

SAP AG (NYSE: SAP) closed yesterday at $46.60. So far the stock has hit a 52-week low of $29.37 and 52-week high of $52.73. SAP AG stock has been showing support around 45.74 and resistance in the 47.06 range. Technical indicators for the stock are Bearish and S&P gives SAP a positive 4 STAR (out of 5) buy rating. SAP appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 46 covered call (PFZ AT) for a net debit in the $43.85 area. That is also the break even stock price for this trade. This covered call has a 73 day duration, provides 5.90% downside protection and a 4.90% assigned return rate for a 24.52% 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 SAP Jan '11 25 Call (VSP AE) and selling the Jan '10 46 call (PFZ AT) for a $19.90 debit. The trade has a 73 day life and would provide 3.65% downside protection and a 5.53% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). SAP AG has a current annual dividend yield of 1.11%. [WBA-Seven Summits Research]