Charles Schwab (SCHW) 11/6/09 PriceWatch Alert At $15.73 Break Even

Posted: Friday, November 06, 2009 8:19 AM EDT
By: Market Intelligence Center Staff

Charles Schwab (NasdaqNM: SCHW) closed yesterday at $17.28. So far the stock has hit a 52-week low of $11.00 and 52-week high of $19.87. Charles Schwab stock has been showing support around 16.79 and resistance in the 17.59 range. Technical indicators for the stock are Bearish and S&P gives SCHW a weak 2 STAR (out of 5) sell rating. SCHW appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Mar '10 17 covered call (SHQ CQ) for a net debit in the $15.73 area. That is also the break even stock price for this trade. This covered call has a 134 day duration, provides 8.97% downside protection and an 8.07% assigned return rate for a 21.99% 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 SCHW Jan '11 10 Call (VYS AB) and selling the Mar '10 17 call (SHQ CQ) for a $6.05 debit. The trade has a 134 day life and would provide 7.12% downside protection and a 15.70% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). Charles Schwab has a current annual dividend yield of 1.39%. [FBB-Seven Summits Research]