SunTrust Banks (STI) 11/18/09 PriceWatch Alert At $16.56 Break Even

Posted: Wednesday, November 18, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

SunTrust Banks (NYSE: STI) closed yesterday at $21.86. So far the stock has hit a 52-week low of $6.00 and 52-week high of $34.12. SunTrust Banks stock has been showing support around 20.37 and resistance in the 22.69 range. Technical indicators for the stock are Bullish and S&P gives STI a neutral 3 STAR (out of 5) hold rating. STI appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 18 covered call (SFJ DO) for a net debit in the $16.56 area. That is also the break even stock price for this trade. This covered call has a 150 day duration, provides 24.25% downside protection and an 8.70% assigned return rate for a 21.16% 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 STI Jan '11 5 Call (VNJ AA) and selling the Apr '10 18 call (SFJ DO) for an $11.90 debit. The trade has a 150 day life and would provide 22.69% downside protection and a 9.24% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). SunTrust Banks has a current annual dividend yield of 0.20%. [WBA-Seven Summits Research]