TD Ameritrade (AMTD) 11/6/09 PriceWatch Alert With 16.68% Downside Protection

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

TD Ameritrade (NasdaqNM: AMTD) closed yesterday at $19.79. So far the stock has hit a 52-week low of $9.34 and 52-week high of $20.93. TD Ameritrade stock has been showing support around 19.28 and resistance in the 20.04 range. Technical indicators for the stock are Bullish and S&P gives AMTD a positive 4 STAR (out of 5) buy rating. AMTD appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a May '10 17.50 covered call (TQA EW) for a net debit in the $16.49 area. That is also the break even stock price for this trade. This covered call has a 197 day duration, provides 16.68% downside protection and a 6.12% assigned return rate for an 11.35% 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 AMTD Jan '11 10 Call (VCY AB) and selling the May '10 17.50 call (TQA EW) for a $6.80 debit. The trade has a 197 day life and would provide 15.11% downside protection and a 10.29% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). TD Ameritrade does not pay dividends at this time. [FBB-Seven Summits Research]