SanDisk (SNDK) 11/4/09 PriceWatch Alert With Support Around $19.30

Posted: Wednesday, November 04, 2009 8:39 AM EDT

SanDisk (NasdaqNM: SNDK) closed yesterday at $20.31. So far the stock has hit a 52-week low of $5.07 and 52-week high of $24.61. SanDisk stock has been showing support around 19.30 and resistance in the 20.92 range. Technical indicators for the stock are Bearish and S&P gives SNDK a neutral 3 STAR (out of 5) hold rating. SNDK appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 16 covered call (SWQ DQ) for a net debit in the $14.71 area. That is also the break even stock price for this trade. This covered call has a 164 day duration, provides 27.57% downside protection and an 8.77% assigned return rate for a 19.52% 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 SNDK Jan '11 5 Call (OWS AA) and selling the Apr '10 16 call (SWQ DQ) for a $9.75 debit. The trade has a 164 day life and would provide 27.38% downside protection and a 12.82% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). SanDisk does not pay dividends at this time. [WBA-Seven Summits Research]

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