Raytheon (RTN) 11/18/09 PriceWatch Alert With 3.39% Downside Protection

Posted: Wednesday, November 18, 2009 8:25 AM EDT
By: Market Intelligence Center Staff

Raytheon (NYSE: RTN) closed yesterday at $50.21. So far the stock has hit a 52-week low of $33.20 and 52-week high of $53.00. Raytheon stock has been showing support around 49.22 and resistance in the 50.82 range. Technical indicators for the stock are Bullish and S&P gives RTN a neutral 3 STAR (out of 5) hold rating. RTN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 50 covered call (RTN AJ) for a net debit in the $48.51 area. That is also the break even stock price for this trade. This covered call has a 59 day duration, provides 3.39% downside protection and a 3.07% assigned return rate for a 19.00% 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 RTN Jan '11 35 Call (OHU AG) and selling the Jan '10 50 call (RTN AJ) for a $13.80 debit. The trade has a 59 day life and would provide 2.81% downside protection and an 8.70% assigned return rate for a 54.00% annualized return rate (for comparison purposes only). Raytheon has a current annual dividend yield of 2.53%. [WBA-Seven Summits Research]