Kellogg (K) 11/6/09 PriceWatch Alert Support At Around $51.42

Posted: Friday, November 06, 2009 8:43 AM EDT
By: Market Intelligence Center Staff

Kellogg (NYSE: K) closed yesterday at $52.23. So far the stock has hit a 52-week low of $35.64 and 52-week high of $52.58. Kellogg stock has been showing support around 51.42 and resistance in the 52.68 range. Technical indicators for the stock are Bullish and S&P gives K a positive 4 STAR (out of 5) buy rating. K appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Mar '10 50 covered call (K CJ) for a net debit in the $48.93 area. That is also the break even stock price for this trade. This covered call has a 134 day duration, provides 6.32% downside protection and a 2.19% assigned return rate for a 5.96% 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 K Jan '11 40 Call (VLK AH) and selling the Mar '10 50 call (K CJ) for a $9.20 debit. The trade has a 134 day life and would provide 5.80% downside protection and an 8.70% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). Kellogg has a current annual dividend yield of 2.93%. [FBB-Seven Summits Research]