Dow Chemical (DOW) Trading In Wide Support/Resistance Range

Dow Chemical (NYSE: DOW) closed yesterday at $26.46. So far the stock has hit a 52-week low of $5.89 and 52-week high of $27.39. Dow Chemical stock has been showing support around 23.48 and resistance in the 28.08 range. Technical indicators for the stock are Bullish and S&P gives DOW a neutral 3 STAR (out of 5) hold rating. DOW appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 25 covered call (NZA AY) for a net debit in the $23.56 area. That is also the break even stock price for this trade. This covered call has an 85 day duration, provides 10.96% downside protection and a 6.11% assigned return rate for a 26.25% 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 DOW Jan '11 12.50 Call (VDO AV) and selling the Jan '10 25 call (NZA AY) for an $11.20 debit. The trade has an 85 day life and would provide 10.43% downside protection and an 11.61% assigned return rate for a 50.00% annualized return rate (for comparison purposes only). Dow Chemical has a current annual dividend yield of 2.24%.

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