Ford Motor (F) 11/17/09 PriceWatch Alert With $7.06 Break Even

Posted: Tuesday, November 17, 2009 8:10 AM EDT
By: Market Intelligence Center Staff

Ford Motor (NYSE: F) closed yesterday at $8.71. So far the stock has hit a 52-week low of $1.01 and 52-week high of $8.86. Ford Motor stock has been showing support around 8.38 and resistance in the 8.96 range. Technical indicators for the stock are Bullish and S&P gives F a neutral 3 STAR (out of 5) hold rating. F appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 8 covered call (F FK) for a net debit in the $7.06 area. That is also the break even stock price for this trade. This covered call has a 214 day duration, provides 18.94% downside protection and a 13.31% assigned return rate for a 22.71% 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 F Jan '11 5 Call (OKF AA) and selling the Jun '10 8 call (F FK) for a $2.55 debit. The trade has a 214 day life and would provide 13.32% downside protection and a 17.65% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Ford Motor does not pay dividends at this time. [ATU-Seven Summits Research]