Fastenal (FAST) 11/6/09 PriceWatch Alert Targets 8.08% Downside Protection

Posted: Friday, November 06, 2009 8:14 AM EDT
By: Market Intelligence Center Staff

Fastenal (NasdaqNM: FAST) closed yesterday at $36.50. So far the stock has hit a 52-week low of $25.87 and 52-week high of $41.67. Fastenal stock has been showing support around 35.42 and resistance in the 37.30 range. Technical indicators for the stock are Bearish and S&P gives FAST a very positive 5 STAR (out of 5) strong buy rating. FAST appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 35 covered call (FQA AG) for a net debit in the $33.55 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 8.08% downside protection and a 4.32% assigned return rate for a 22.22% 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 FAST Jan '11 20 Call (VWS AD) and selling the Jan '10 35 call (FQA AG) for a $14.05 debit. The trade has a 71 day life and would provide 6.71% downside protection and a 6.76% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). Fastenal has a current annual dividend yield of 2.07%. [FBB-Seven Summits Research]