Macy's Inc. (M) 11/17/09 PriceWatch Alert With 24.22% Downside Protection

Posted: Tuesday, November 17, 2009 8:20 AM EDT
By: Market Intelligence Center Staff

Macy's Inc. (NYSE: M) closed yesterday at $18.17. So far the stock has hit a 52-week low of $5.07 and 52-week high of $20.84. Macy's stock has been showing support around 17.78 and resistance in the 18.70 range. Technical indicators for the stock are Bullish and S&P gives M a neutral 3 STAR (out of 5) hold rating. M appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 15 covered call (M EC) for a net debit in the $13.77 area. That is also the break even stock price for this trade. This covered call has an 186 day duration, provides 24.22% downside protection and an 8.93% assigned return rate for a 17.53% 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 M Jan '11 5 Call (VFD AA) and selling the May '10 15 call (M EC) for an $8.90 debit. The trade has an 186 day life and would provide 23.50% downside protection and a 12.36% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). Macy's has a current annual dividend yield of 1.14%. [ATU-Seven Summits Research]