Limited Brands (LTD) 11/5/09 PriceWatch Alert Up To 14.87% Return

Posted: Thursday, November 05, 2009 8:23 AM EDT
By: Market Intelligence Center Staff

Limited Brands (NYSE: LTD) closed yesterday at $17.78. So far the stock has hit a 52-week low of $5.98 and 52-week high of $19.99. Limited Brands stock has been showing support around 17.36 and resistance in the 18.36 range. Technical indicators for the stock are Bullish and S&P gives LTD a neutral 3 STAR (out of 5) hold rating. LTD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a May '10 15 covered call (LTD EC) for a net debit in the $13.88 area. That is also the break even stock price for this trade. This covered call has a 198 day duration, provides 21.93% downside protection and an 8.07% assigned return rate for a 14.87% 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 LTD Jan '11 5 Call (VLD AA) and selling the May '10 15 call (LTD EC) for an $8.80 debit. The trade has a 198 day life and would provide 22.38% downside protection and a 13.64% assigned return rate for a 25.00% annualized return rate (for comparison purposes only). Limited Brands has a current annual dividend yield of 3.35%. [THA-Seven Summits Research]