Daimler AG (DAI) 11/6/09 PriceWatch Alert Up To 11.53% Downside Protection

Posted: Friday, November 06, 2009 8:37 AM EDT
By: Market Intelligence Center Staff

Daimler AG (NYSE: DAI) closed yesterday at $48.55. So far the stock has hit a 52-week low of $21.53 and 52-week high of $56.57. Daimler stock has been showing support around 47.81 and resistance in the 49.33 range. Technical indicators for the stock are Bearish and S&P gives DAI a neutral 3 STAR (out of 5) hold rating. DAI appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 45 covered call (DAI AI) for a net debit in the $42.95 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 11.53% downside protection and a 4.77% assigned return rate for a 24.54% 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 DAI Jan '11 12.50 Call (VLN AV) and selling the Jan '10 45 call (DAI AI) for a $31.00 debit. The trade has a 71 day life and would provide 10.40% downside protection and a 4.84% assigned return rate for a 25.00% annualized return rate (for comparison purposes only). Daimler has a current annual dividend yield of 1.70%. [FBB-Seven Summits Research]