State Street (STT) 11/6/09 PriceWatch Alert With 10.75% Downside Protection

Posted: Friday, November 06, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

State Street (NYSE: STT) closed yesterday at $42.81. So far the stock has hit a 52-week low of $14.43 and 52-week high of $55.87. State Street stock has been showing support around 39.26 and resistance in the 44.64 range. Technical indicators for the stock are Bearish and S&P gives STT a very positive 5 STAR (out of 5) strong buy rating. STT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 41 covered call (SPJ AA) for a net debit in the $38.21 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 10.75% downside protection and a 7.30% assigned return rate for a 37.54% 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 STT Jan '11 17.50 Call (OLD AW) and selling the Jan '10 41 call (SPJ AA) for a $21.05 debit. The trade has a 71 day life and would provide 9.95% downside protection and an 11.64% assigned return rate for a 60.00% annualized return rate (for comparison purposes only). State Street has a current annual dividend yield of 0.09%. [FBB-Seven Summits Research]