Macy's Inc. (M) 11/20/09 PriceWatch Alert Targets 21.86% Downside Protection

Posted: Friday, November 20, 2009 8:17 AM EDT
By: Market Intelligence Center Staff

Macy's Inc. (NYSE: M) closed yesterday at $17.38. So far the stock has hit a 52-week low of $5.07 and 52-week high of $20.84. Macy's stock has been showing support around 16.90 and resistance in the 17.94 range. Technical indicators for the stock are Bearish and S&P gives M a neutral 3 STAR (out of 5) hold rating. M appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 15 covered call (M EC) for a net debit in the $13.58 area. That is also the break even stock price for this trade. This covered call has an 183 day duration, provides 21.86% downside protection and a 10.46% assigned return rate for a 20.86% 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 M Jan '11 7.50 Call (VFD AU) and selling the May '10 15 call (M EC) for a $6.50 debit. The trade has an 183 day life and would provide 19.45% downside protection and a 15.38% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). Macy's has a current annual dividend yield of 1.13%. [FBB-Seven Summits Research]