Bank of New York Mellon (BK) 11/16/09 PriceWatch Alert Up To 24.65% Return

Posted: Monday, November 16, 2009 8:40 AM EDT

Bank of New York Mellon (NYSE: BK) ended the last trading session at $27.45. So far the stock has hit a 52-week low of $15.44 and 52-week high of $33.62. Bank of New York Mellon stock has been showing support around 26.86 and resistance in the 27.92 range. Technical indicators for the stock are Bearish and S&P gives BK a positive 4 STAR (out of 5) buy rating. BK appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 28 covered call (BK FG) for a net debit in the $24.45 area. That is also the break even stock price for this trade. This covered call has a 215 day duration, provides 10.93% downside protection and a 14.52% assigned return rate for a 24.65% 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 BK Jan '11 17.50 Call (OUY AW) and selling the Jun '10 28 call (BK FG) for an $8.00 debit. The trade has a 215 day life and would provide 7.10% downside protection and a 31.25% assigned return rate for a 53.00% annualized return rate (for comparison purposes only). Bank of New York Mellon has a current annual dividend yield of 1.31%. [ABR-Seven Summits Research]

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