Northrop Grumman (NOC) PriceWatch Alert for November 20, 2009

Posted: Friday, November 20, 2009 8:12 AM EDT
By: Market Intelligence Center Staff

Northrop Grumman (NYSE: NOC) closed yesterday at $54.50. So far the stock has hit a 52-week low of $33.81 and 52-week high of $56.46. Northrop Grumman stock has been showing support around 53.32 and resistance in the 56.22 range. Technical indicators for the stock are Bullish and S&P gives NOC a neutral 3 STAR (out of 5) hold rating. NOC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a May '10 50 covered call (NOC EJ) for a net debit in the $48.40 area. That is also the break even stock price for this trade. This covered call has an 183 day duration, provides 11.19% downside protection and a 3.31% assigned return rate for a 6.59% 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 NOC Jan '11 40 Call (VOJ AH) and selling the May '10 50 call (NOC EJ) for an $8.55 debit. The trade has an 183 day life and would provide 10.92% downside protection and a 16.96% assigned return rate for a 34.00% annualized return rate (for comparison purposes only). Northrop Grumman has a current annual dividend yield of 3.07%. [FBB-Seven Summits Research]