SunTrust Banks (STI) 11/12/09 PriceWatch Alert Could Hit 19.05% Return

Posted: Thursday, November 12, 2009 8:18 AM EDT
By: Market Intelligence Center Staff

SunTrust Banks (NYSE: STI) closed yesterday at $21.07. So far the stock has hit a 52-week low of $6.00 and 52-week high of $36.95. SunTrust Banks stock has been showing support around 20.03 and resistance in the 21.71 range. Technical indicators for the stock are Bullish and S&P gives STI a neutral 3 STAR (out of 5) hold rating. STI appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 17 covered call (SFJ DN) for a net debit in the $15.72 area. That is also the break even stock price for this trade. This covered call has a 156 day duration, provides 25.39% downside protection and an 8.14% assigned return rate for a 19.05% 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 STI Jan '11 5 Call (VNJ AA) and selling the Apr '10 17 call (SFJ DN) for a $10.90 debit. The trade has a 156 day life and would provide 24.54% downside protection and a 10.09% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). SunTrust Banks has a current annual dividend yield of 0.19%. [THA-Seven Summits Research]