Honeywell International (HON) 11/6/09 PriceWatch Alert Targets 4.12% Downside Protection

Posted: Friday, November 06, 2009 8:21 AM EDT
By: Market Intelligence Center Staff

Honeywell International (NYSE: HON) closed yesterday at $37.59. So far the stock has hit a 52-week low of $23.06 and 52-week high of $40.55. Honeywell International stock has been showing support around 36.22 and resistance in the 38.28 range. Technical indicators for the stock are Bullish and S&P gives HON a very positive 5 STAR (out of 5) strong buy rating. HON appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 38 covered call (HQN AL) for a net debit in the $36.04 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 4.12% downside protection and a 5.44% assigned return rate for a 27.96% 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 HON Jan '11 25 Call (VAD AE) and selling the Jan '10 38 call (HQN AL) for an $11.40 debit. The trade has a 71 day life and would provide 3.17% downside protection and a 14.04% assigned return rate for a 72.00% annualized return rate (for comparison purposes only). Honeywell International has a current annual dividend yield of 3.36%. [FBB-Seven Summits Research]