H J Heinz (HNZ) Support Down To $39.75 With S&P 4 Star Buy Rating

H J Heinz (NYSE: HNZ) closed yesterday at $40.38. So far the stock has hit a 52-week low of $30.51 and 52-week high of $45.83. Heinz stock has been showing support around 39.75 and resistance in the 41.39 range. Technical indicators for the stock are Bullish and S&P gives HNZ a positive 4 STAR (out of 5) buy rating. HNZ appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Dec '09 40 covered call (HNZ LH) for a net debit in the $39.03 area. That is also the break even stock price for this trade. This covered call has a 53 day duration, provides 3.34% downside protection and a 2.49% assigned return rate for a 17.12% 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 HNZ Jan '11 25 Call (VHN AE) and selling the Dec '09 40 call (HNZ LH) for a $14.65 debit. The trade has a 53 day life and would provide 1.81% downside protection and a 2.39% assigned return rate for a 16.00% annualized return rate (for comparison purposes only). Heinz has a current annual dividend yield of 4.09%.

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