3M (MMM) 11/17/09 PriceWatch Alert Up To 10.00% Return

Posted: Tuesday, November 17, 2009 8:25 AM EDT
By: Market Intelligence Center Staff

3M (NYSE: MMM) closed yesterday at $78.02. So far the stock has hit a 52-week low of $40.87 and 52-week high of $79.25. 3M stock has been showing support around 77.05 and resistance in the 78.77 range. Technical indicators for the stock are Bullish and S&P gives MMM a positive 4 STAR (out of 5) buy rating. MMM appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 75 covered call (MMM DO) for a net debit in the $72.02 area. That is also the break even stock price for this trade. This covered call has a 151 day duration, provides 7.69% downside protection and a 4.14% assigned return rate for a 10.00% 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 MMM Jan '11 55 Call (VMU AK) and selling the Apr '10 75 call (MMM DO) for a $17.50 debit. The trade has a 151 day life and would provide 7.08% downside protection and a 14.29% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). 3M has a current annual dividend yield of 2.64%. [ATU-Seven Summits Research]