Foot Locker (FL) Trading Near $18.78 Support Level

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Foot Locker Inc. (NYSE: FL) closed Tuesday's trading session at $19.18. In the past year, the stock has hit a 52-week low of $9.46 and 52-week high of $19.74. Foot Locker stock has been showing support around $18.78 and resistance in the $19.94 range. Technical indicators for the stock are Bullish and S&P gives FL a neutral 3 STARS (out of 5) hold rating. For a hedged play on this stock, look at the May '11 $17.50 covered call for a net debit in the $16.48 area. That is also the break-even stock price for this trade. This covered call has a duration of 164 days, provides 14.08% downside protection and an assigned return rate of 6.19% for an annualized return rate of 13.78% (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 FL Jan '12 $12.50 call and selling the May '11 $17.50 call for a total debit of $4.55. The trade has a lifespan of 164 days and would provide 11.11% downside protection and an assigned return rate of 9.89% for an annualized return rate of 22% (for comparison purposes only). Foot Locker has a current annual dividend yield of 3.06%. [THA-Seven Summits Research]