Ryder System (R) 11/16/09 PriceWatch Alert With $37.64 Break Even

Posted: Monday, November 16, 2009 8:11 AM EDT
By: Market Intelligence Center Staff

Ryder System (NYSE: R) ended the last trading session at $43.34. So far the stock has hit a 52-week low of $19.00 and 52-week high of $46.58. Ryder System stock has been showing support around 42.29 and resistance in the 44.21 range. Technical indicators for the stock are Bullish and S&P gives R a neutral 3 STAR (out of 5) hold rating. R appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a May '10 42.50 covered call (R ER) for a net debit in the $37.64 area. That is also the break even stock price for this trade. This covered call has an 187 day duration, provides 13.15% downside protection and a 12.91% assigned return rate for a 25.20% 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 R Jan '11 27.50 Call (VRV AY) and selling the May '10 42.50 call (R ER) for an $11.90 debit. The trade has an 187 day life and would provide 9.09% downside protection and a 26.05% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Ryder System has a current annual dividend yield of 2.25%. [ABR-Seven Summits Research]