Ryder System (R) 11/11/09 PriceWatch Alert Up To 12.84% Downside Protection

Posted: Wednesday, November 11, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

Ryder System (NYSE: R) closed yesterday at $43.60. So far the stock has hit a 52-week low of $19.00 and 52-week high of $46.58. Ryder System stock has been showing support around 42.09 and resistance in the 44.63 range. Technical indicators for the stock are Bullish and S&P gives R a neutral 3 STAR (out of 5) hold rating. R appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a May '10 42.50 covered call (R ER) for a net debit in the $38.00 area. That is also the break even stock price for this trade. This covered call has a 192 day duration, provides 12.84% downside protection and an 11.84% assigned return rate for a 22.51% 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 R Jan '11 25 Call (VRV AE) and selling the May '10 42.50 call (R ER) for a $14.15 debit. The trade has a 192 day life and would provide 10.21% downside protection and a 23.67% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). Ryder System has a current annual dividend yield of 2.30%. [WBA-Seven Summits Research]