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Sunday, May 1, 2011

Watches Profits Increase During Recession, Costco Wholesale Corp

Watches Profits Increase During Recession, Costco Wholesale Corp ; Costco Wholesale Corp (NASDAQ: COST) closed Monday's trading session at $78.66. In the past year, the stock has hit a 52-week low of $53.41 and 52-week high of $78.96. Costco Wholesale stock has been showing support around $78.12 and resistance in the $79.14 range. Technical indicators for the stock are Bullish and S&P gives COST a neutral 3 STARS (out of 5) hold rating.

For a hedged play on this stock, look at the Jun '11 $77.50 covered call for a net debit in the $75.85 area. That is also the break-even stock price for this trade. This covered call has a duration of 53 days, provides 3.57% downside protection and an assigned return rate of 2.18% for an annualized return rate of 14.98% (for 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 COST Jan '12 $55.00 call and selling the Jun '11 $77.50 call for a total debit of $21.09.

The trade has a lifespan of 53 days and would provide 3.27% downside protection and an assigned return rate of 6.69% for an annualized return rate of 46% (for comparison purposes only). Costco Wholesale has a current annual dividend yield of 1.04%.source dailynewspulse.com ...

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