Potential Garmin (GRMN) Trade Targets 17.19% Return

Garmin (NASDAQ:GRMN) closed Wednesday's dramatic trading session at $33.23. In the past year, the stock has hit a 52-week low of $26.11 and 52-week high of $36.42. Garmin stock has been showing support around $32.97 and resistance in the $33.53 range. Technical indicators for the stock are Bearish and S&P gives GRMN a weak 2 STARS (out of 5) sell rating. For a hedged play on this stock, look at the Oct '11 $34.00 covered call for a net debit in the $31.77 area. That is also the break-even stock price for this trade. This covered call has a duration of 149 days, provides 4.39% downside protection and an assigned return rate of 7.02% for an annualized return rate of 17.19% (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 GRMN Jan '12 $30.00 call and selling the Oct '11 $34.00 call for a total debit of $2.69. The trade has a lifespan of 149 days and would provide 1.63% downside protection and an assigned return rate of 48.70% for an annualized return rate of 119% (for comparison purposes only). Garmin has a current annual dividend yield of 4.39%. [THA-Seven Summits Research]

Source: www.marketintelligencecenter.com