SanDisk (SNDK) 11/19/09 PriceWatch Alert Targets 21.98% Downside Protection

Posted: Thursday, November 19, 2009 8:12 AM EDT
By: Market Intelligence Center Staff

SanDisk (NasdaqNM: SNDK) closed yesterday at $21.16. So far the stock has hit a 52-week low of $5.07 and 52-week high of $24.61. SanDisk stock has been showing support around 20.71 and resistance in the 21.83 range. Technical indicators for the stock are Neutral and S&P gives SNDK a neutral 3 STAR (out of 5) hold rating. SNDK appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 18 covered call (SWQ DJ) for a net debit in the $16.51 area. That is also the break even stock price for this trade. This covered call has a 149 day duration, provides 21.98% downside protection and a 9.02% assigned return rate for a 22.11% 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 SNDK Jan '11 5 Call (OWS AA) and selling the Apr '10 18 call (SWQ DJ) for a $12.00 debit. The trade has a 149 day life and would provide 19.66% downside protection and an 8.33% assigned return rate for a 20.00% annualized return rate (for comparison purposes only). SanDisk does not pay dividends at this time. [THA-Seven Summits Research]