Kraft Foods (KFT) 11/16/09 PriceWatch Alert Could Hit 8.14% Return

Posted: Monday, November 16, 2009 8:26 AM EDT
By: Market Intelligence Center Staff

Kraft Foods (NYSE: KFT) ended the last trading session at $26.91. So far the stock has hit a 52-week low of $20.81 and 52-week high of $29.84. Kraft Foods stock has been showing support around 26.62 and resistance in the 27.26 range. Technical indicators for the stock are Bearish and S&P gives KFT a weak 2 STAR (out of 5) sell rating. KFT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jun '10 26 covered call (KFT FJ) for a net debit in the $24.81 area. That is also the break even stock price for this trade. This covered call has a 215 day duration, provides 7.80% downside protection and a 4.80% assigned return rate for an 8.14% 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 KFT Jan '11 22.50 Call (ODR AX) and selling the Jun '10 26 call (KFT FJ) for a $2.85 debit. The trade has a 215 day life and would provide 5.80% downside protection and a 22.81% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). Kraft Foods has a current annual dividend yield of 4.33%. [ABR-Seven Summits Research]