Intuitive Surgical (ISRG) 11/6/09 PriceWatch Alert Targets 6.39% Downside Protection

Posted: Friday, November 06, 2009 8:42 AM EDT

Intuitive Surgical (NasdaqNM: ISRG) closed yesterday at $259.91. So far the stock has hit a 52-week low of $84.86 and 52-week high of $269.27. Intuitive Surgical stock has been showing support around 249.66 and resistance in the 265.38 range. Technical indicators for the stock are Bullish and S&P gives ISRG a neutral 3 STAR (out of 5) hold rating. ISRG appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 260 covered call (AXV AX) for a net debit in the $243.31 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 6.39% downside protection and a 6.86% assigned return rate for a 35.26% 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 ISRG Jan '11 105 Call (OKC AA) and selling the Jan '10 260 call (AXV AX) for a $141.00 debit. The trade has a 71 day life and would provide 5.35% downside protection and a 9.93% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Intuitive Surgical does not pay dividends at this time. [FBB-Seven Summits Research]

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