Goodyear Tire and Rubber (GT) PriceWatch Alert for November 20, 2009

Posted: Friday, November 20, 2009 8:13 AM EDT

Goodyear Tire and Rubber (NYSE: GT) closed yesterday at $14.45. 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 13.92 and resistance in the 14.80 range. Technical indicators for the stock are Bearish and S&P gives GT a positive 4 STAR (out of 5) buy 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 $11.55 area. That is also the break even stock price for this trade. This covered call has a 148 day duration, provides 20.07% downside protection and an 8.23% assigned return rate for a 20.28% 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 $7.20 debit. The trade has a 148 day life and would provide 15.57% downside protection and a 4.17% assigned return rate for a 10.00% annualized return rate (for comparison purposes only). Goodyear does not pay dividends at this time. [FBB-Seven Summits Research]

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