TRW Automotive (TRW) Could Fall Through $51.35 Support Level - Market Intelligence Center

TRW Automotive (NYSE:TRW) closed Monday's calm trading session at $52.36. In the past year, the stock has hit a 52-week low of $26.20 and 52-week high of $63.26. TRW Automotive stock has been showing support around $51.35 and resistance in the $53.87 range. Technical indicators for the stock are Bearish and S&P gives (TRW) a very positive 5 STARS (out of 5) strong buy rating. For a hedged play on this stock, look at the Oct '11 $50.00 covered call for a net debit in the $46.56 area. That is also the break-even stock price for this trade. This covered call has a duration of 130 days, provides 11.08% downside protection and an assigned return rate of 7.39% for an annualized return rate of 20.74% (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 (TRW) Jan '12 $40.00 call and selling the Oct '11 $50.00 call for a total debit of $8.70. The trade has a lifespan of 130 days and would provide 6.99% downside protection and an assigned return rate of 14.94% for an annualized return rate of 42% (for comparison purposes only). TRW Automotive does not pay dividends at this time. [FBB-Seven Summits Research]

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