Whole Foods Market (WFMI) 11/20/09 PriceWatch Alert With 14.65% Downside Protection

Posted: Friday, November 20, 2009 8:16 AM EDT
By: Market Intelligence Center Staff

Whole Foods Market (NasdaqNM: WFMI) closed yesterday at $26.97. So far the stock has hit a 52-week low of $7.04 and 52-week high of $34.40. Whole Foods Market stock has been showing support around 26.00 and resistance in the 27.52 range. Technical indicators for the stock are Bearish and S&P gives WFMI a weak 2 STAR (out of 5) sell rating. WFMI appears on the Investors Observer Stocks In The News list. BMO Capital Markets upgraded WFMI Thursday to Outperform from Market Perform. For a hedged play on this stock, look at a May '10 26 covered call (FWZ EO) for a net debit in the $23.02 area. That is also the break even stock price for this trade. This covered call has an 183 day duration, provides 14.65% downside protection and a 12.95% assigned return rate for a 25.82% 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 WFMI Jan '11 15 Call (OAW AC) and selling the May '10 26 call (FWZ EO) for an $8.90 debit. The trade has an 183 day life and would provide 11.38% downside protection and a 23.60% assigned return rate for a 47.00% annualized return rate (for comparison purposes only). Whole Foods Market does not pay dividends at this time. [FBB-Seven Summits Research]