Yum Brands (YUM) 11/20/09 PriceWatch Alert Up To 28.81% Return

Posted: Friday, November 20, 2009 8:30 AM EDT
By: Market Intelligence Center Staff

Yum Brands (NYSE: YUM) closed yesterday at $35.65. So far the stock has hit a 52-week low of $21.50 and 52-week high of $36.96. Yum Brands stock has been showing support around 35.02 and resistance in the 36.06 range. Technical indicators for the stock are Bullish and S&P gives YUM a weak 2 STAR (out of 5) sell rating. YUM appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 36 covered call (YUM AQ) for a net debit in the $34.45 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 3.37% downside protection and a 4.50% assigned return rate for a 28.81% 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 YUM Jan '11 20 Call (VRJ AD) and selling the Jan '10 36 call (YUM AQ) for a $14.45 debit. The trade has a 57 day life and would provide 3.37% downside protection and a 10.73% assigned return rate for a 69.00% annualized return rate (for comparison purposes only). Yum Brands has a current annual dividend yield of 2.33%. [FBB-Seven Summits Research]