Analog Devices Inc. (ADI) 11/5/09 PriceWatch Alert Could Hit 21.56% Return

Posted: Thursday, November 05, 2009 8:33 AM EDT
By: Market Intelligence Center Staff

Analog Devices Inc. (NYSE: ADI) closed yesterday at $26.13. So far the stock has hit a 52-week low of $15.29 and 52-week high of $29.71. Analog Devices stock has been showing support around 25.69 and resistance in the 26.71 range. Technical indicators for the stock are Bearish and S&P gives ADI a neutral 3 STAR (out of 5) hold rating. ADI appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 25 covered call (ADI AE) for a net debit in the $23.98 area. That is also the break even stock price for this trade. This covered call has a 72 day duration, provides 8.23% downside protection and a 4.25% assigned return rate for a 21.56% 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 ADI Jan '11 15 Call (VIK AC) and selling the Jan '10 25 call (ADI AE) for a $9.35 debit. The trade has a 72 day life and would provide 6.81% downside protection and a 6.95% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). Analog Devices has a current annual dividend yield of 3.10%. [THA-Seven Summits Research]