Monday, November 28, 2011

Johnson Controls (JCI) Showing Support Near $28.14 With 2.23% Dividend Yield

Johnson Controls Inc. (NYSE: JCI) closed Tuesday's trading session at $28.63. In the past year, the stock has hit a 52-week low of $24.29 and 52-week high of $42.92. Johnson Controls stock has been showing support around $28.14 and resistance in the $29.28 range. Technical indicators for the stock are Bearish and S&P gives Johnson Controls a very positive 5 STARS (out of 5) strong buy rating. For a hedged play on Johnson Controls look at the Jul '12 $29.00 covered call for a net debit in the $24.93 area. That is also the break-even stock price for this trade. This covered call has a duration of 241 days, provides 12.92% downside protection and an assigned return rate of 16.33% for an annualized return rate of 24.73% (for comparison purposes only). A lower-cost hedged play for Johnson Controls would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the Johnson Controls Jan '13 $20.00 call and selling the Jul '12 $29.00 call for a total debit of $6.40. The trade has a lifespan of 241 days and would provide 7.79% downside protection and an assigned return rate of 40.63% for an annualized return rate of 62% (for comparison purposes only). Johnson Controls has a current annual dividend yield of 2.23%. []

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