Royal Bank of Canada (RY) 11/12/09 PriceWatch Alert Down To $47.86 Break Even

Posted: Thursday, November 12, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

Royal Bank of Canada (NYSE: RY) closed yesterday at $54.56. So far the stock has hit a 52-week low of $20.51 and 52-week high of $55.44. Royal Bank of Canada stock has been showing support around 53.83 and resistance in the 55.81 range. Technical indicators for the stock are Bullish and S&P gives RY a neutral 3 STAR (out of 5) hold rating. RY appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 50 covered call (RY DJ) for a net debit in the $47.86 area. That is also the break even stock price for this trade. This covered call has a 156 day duration, provides 12.28% downside protection and a 4.47% assigned return rate for a 10.46% 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 RY Jan '11 40 Call (VDK AH) and selling the Apr '10 50 call (RY DJ) for a $9.55 debit. The trade has a 156 day life and would provide 9.18% downside protection and a 4.71% assigned return rate for an 11.00% annualized return rate (for comparison purposes only). Royal Bank of Canada has a current annual dividend yield of 3.49%. [THA-Seven Summits Research]