Goodyear Tire and Rubber (GT) PriceWatch Alert for November 18, 2009

Posted: Wednesday, November 18, 2009 8:21 AM EDT
By: Market Intelligence Center Staff

Goodyear Tire and Rubber (NYSE: GT) closed yesterday at $14.59. So far the stock has hit a 52-week low of $3.17 and 52-week high of $18.84. Goodyear stock has been showing support around 14.20 and resistance in the 14.90 range. Technical indicators for the stock are Bearish and S&P gives GT a neutral 3 STAR (out of 5) hold rating. GT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 12.50 covered call (GT DV) for a net debit in the $11.49 area. That is also the break even stock price for this trade. This covered call has a 150 day duration, provides 21.25% downside protection and an 8.79% assigned return rate for a 21.39% 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 GT Jan '11 5 Call (VYR AA) and selling the Apr '10 12.50 call (GT DV) for a $7.00 debit. The trade has a 150 day life and would provide 17.75% downside protection and a 7.14% assigned return rate for a 17.00% annualized return rate (for comparison purposes only). Goodyear does not pay dividends at this time. [WBA-Seven Summits Research]