LM Ericsson (ERIC) 11/25/09 PriceWatch Alert Up To 18.69% Return

Posted: Wednesday, November 25, 2009 8:44 AM EDT
By: Market Intelligence Center Staff

LM Ericsson (NasdaqNM: ERIC) closed yesterday at $10.08. So far the stock has hit a 52-week low of $6.27 and 52-week high of $10.92. Ericsson stock has been showing support around 9.86 and resistance in the 10.26 range. Technical indicators for the stock are Bearish and S&P gives ERIC a positive 4 STAR (out of 5) buy rating. ERIC appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jul '10 10 covered call (RQC GB) for a net debit in the $8.93 area. That is also the break even stock price for this trade. This covered call has a 234 day duration, provides 11.41% downside protection and an 11.98% assigned return rate for an 18.69% 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 ERIC Jan '11 5 Call (VYD AA) and selling the Jul '10 10 call (RQC GB) for a $4.20 debit. The trade has a 234 day life and would provide 8.73% downside protection and a 19.05% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Ericsson has a current annual dividend yield of 1.59%. [WBA-Seven Summits Research]