ConAgra Foods (CAG) 11/5/09 PriceWatch Alert Bearish Price Movement

Posted: Thursday, November 05, 2009 8:29 AM EDT
By: Market Intelligence Center Staff

ConAgra Foods (NYSE: CAG) closed yesterday at $20.90. So far the stock has hit a 52-week low of $13.52 and 52-week high of $22.73. ConAgra Foods stock has been showing support around 20.51 and resistance in the 21.27 range. Technical indicators for the stock are Bearish and S&P gives CAG a neutral 3 STAR (out of 5) hold rating. CAG appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 20 covered call (CAG FD) for a net debit in the $19.00 area. That is also the break even stock price for this trade. This covered call has a 226 day duration, provides 9.09% downside protection and a 5.26% assigned return rate for an 8.50% 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 CAG Jan '11 15 Call (OYH AC) and selling the Jun '10 20 call (CAG FD) for a $4.35 debit. The trade has a 226 day life and would provide 7.42% downside protection and a 14.94% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). ConAgra Foods has a current annual dividend yield of 3.83%. [THA-Seven Summits Research]