Qualcomm (QCOM) 11/20/09 PriceWatch Alert With $43.22 Break Even

Posted: Friday, November 20, 2009 8:47 AM EDT
By: Market Intelligence Center Staff

Qualcomm (NasdaqNM: QCOM) closed yesterday at $45.09. So far the stock has hit a 52-week low of $28.16 and 52-week high of $48.72. Qualcomm stock has been showing support around 44.19 and resistance in the 45.81 range. Technical indicators for the stock are Bullish and S&P gives QCOM a weak 2 STAR (out of 5) sell rating. QCOM appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 45 covered call (AAO AI) for a net debit in the $43.22 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 4.15% downside protection and a 4.12% assigned return rate for a 26.37% 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 QCOM Jan '11 22.50 Call (VLM AX) and selling the Jan '10 45 call (AAO AI) for a $20.88 debit. The trade has a 57 day life and would provide 3.79% downside protection and a 7.76% assigned return rate for a 50.00% annualized return rate (for comparison purposes only). Qualcomm has a current annual dividend yield of 1.48%. [FBB-Seven Summits Research]