Payless ShoeSource (PSS) 11/16/09 PriceWatch Alert Bullish Price Movement

Posted: Monday, November 16, 2009 8:06 AM EDT
By: Market Intelligence Center Staff

Payless ShoeSource (NYSE: PSS) ended the last trading session at $20.26. So far the stock has hit a 52-week low of $3.85 and 52-week high of $21.85. Payless ShoeSource stock has been showing support around 19.00 and resistance in the 21.04 range. Technical indicators for the stock are Bullish and S&P gives PSS a weak 2 STAR (out of 5) sell rating. PSS appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jun '10 17.50 covered call (PSS FW) for a net debit in the $15.56 area. That is also the break even stock price for this trade. This covered call has a 215 day duration, provides 23.20% downside protection and a 12.47% assigned return rate for a 21.17% 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 PSS Jan '11 7.50 Call (ZWB AU) and selling the Jun '10 17.50 call (PSS FW) for an $8.50 debit. The trade has a 215 day life and would provide 21.03% downside protection and a 17.65% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Payless ShoeSource does not pay dividends at this time. [ABR-Seven Summits Research]