Textron (TXT) 11/20/09 PriceWatch Alert With $16.08 Break Even

Posted: Friday, November 20, 2009 8:45 AM EDT
By: Market Intelligence Center Staff

Textron (NYSE: TXT) closed yesterday at $20.18. So far the stock has hit a 52-week low of $3.57 and 52-week high of $21.00. Textron stock has been showing support around 19.03 and resistance in the 20.85 range. Technical indicators for the stock are Bullish and S&P gives TXT a positive 4 STAR (out of 5) buy rating. TXT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 18 covered call (TXY FO) for a net debit in the $16.08 area. That is also the break even stock price for this trade. This covered call has a 211 day duration, provides 20.32% downside protection and an 11.94% assigned return rate for a 20.66% 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 TXT Jan '11 10 Call (XUD AB) and selling the Jun '10 18 call (TXY FO) for a $6.75 debit. The trade has a 211 day life and would provide 17.00% downside protection and an 18.52% assigned return rate for a 32.00% annualized return rate (for comparison purposes only). Textron has a current annual dividend yield of 0.39%. [FBB-Seven Summits Research]