Textron (TXT) 11/6/09 PriceWatch Alert Targets 18.30% Return

Posted: Friday, November 06, 2009 8:47 AM EDT
By: Market Intelligence Center Staff

Textron (NYSE: TXT) closed yesterday at $19.13. So far the stock has hit a 52-week low of $3.57 and 52-week high of $20.99. Textron stock has been showing support around 18.16 and resistance in the 19.64 range. Technical indicators for the stock are Bullish and S&P gives TXT a positive 4 STAR (out of 5) buy rating. TXT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '10 17 covered call (TXY CQ) for a net debit in the $15.93 area. That is also the break even stock price for this trade. This covered call has a 134 day duration, provides 16.73% downside protection and a 6.72% assigned return rate for an 18.30% 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 TXT Jan '11 5 Call (XUD AA) and selling the Mar '10 17 call (TXY CQ) for an $11.15 debit. The trade has a 134 day life and would provide 15.58% downside protection and a 7.62% assigned return rate for a 21.00% annualized return rate (for comparison purposes only). Textron has a current annual dividend yield of 0.43%. [FBB-Seven Summits Research]