Deere (DE) 11/6/09 PriceWatch Alert Targets 36.60% Return

Posted: Friday, November 06, 2009 8:35 AM EDT

Deere (NYSE: DE) closed yesterday at $48.11. So far the stock has hit a 52-week low of $24.51 and 52-week high of $49.88. Deere stock has been showing support around 46.68 and resistance in the 48.88 range. Technical indicators for the stock are Bullish and S&P gives DE a positive 4 STAR (out of 5) buy rating. DE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 48 covered call (DGV AV) for a net debit in the $44.81 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 6.86% downside protection and a 7.12% assigned return rate for a 36.60% 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 DE Jan '11 22.50 Call (VER AT) and selling the Jan '10 48 call (DGV AV) for a $22.40 debit. The trade has a 71 day life and would provide 6.67% downside protection and a 13.84% assigned return rate for a 71.00% annualized return rate (for comparison purposes only). Deere has a current annual dividend yield of 2.37%. [FBB-Seven Summits Research]

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