Analog Devices Inc. (ADI) 11/13/09 PriceWatch Alert With $24.00 Break Even

Posted: Friday, November 13, 2009 8:26 AM EDT
By: Market Intelligence Center Staff

Analog Devices Inc. (NYSE: ADI) closed yesterday at $27.40. So far the stock has hit a 52-week low of $15.29 and 52-week high of $29.71. Analog Devices stock has been showing support around 26.89 and resistance in the 28.35 range. Technical indicators for the stock are Bullish and S&P gives ADI a neutral 3 STAR (out of 5) hold rating. ADI appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '10 25 covered call (ADI CE) for a net debit in the $24.00 area. That is also the break even stock price for this trade. This covered call has a 127 day duration, provides 12.41% downside protection and a 4.17% assigned return rate for an 11.98% 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 ADI Jan '11 15 Call (VIK AC) and selling the Mar '10 25 call (ADI CE) for a $9.60 debit. The trade has a 127 day life and would provide 10.22% downside protection and a 4.17% assigned return rate for a 12.00% annualized return rate (for comparison purposes only). Analog Devices has a current annual dividend yield of 2.89%. [FBB-Seven Summits Research]