Sherwin Williams (NYSE:SHW) closed Wednesday's bullish trading session at $86.04. In the past year, the stock has hit a 52-week low of $66.13 and 52-week high of $86.77. Sherwin Williams stock has been showing support around $84.45 and resistance in the $86.95 range. Technical indicators for the stock are Bullish and S&P gives SHW a weak 1 STARS (out of 5) strong sell rating. For a hedged play on this stock, look at the Sep '11 $85.00 covered call for a net debit in the $81.44 area. That is also the break-even stock price for this trade. This covered call has a duration of 121 days, provides 5.35% downside protection and an assigned return rate of 4.37% for an annualized return rate of 13.19% (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 SHW Jan '12 $65.00 call and selling the Sep '11 $85.00 call for a total debit of $16.65. The trade has a lifespan of 121 days and would provide 5.10% downside protection and an assigned return rate of 20.12% for an annualized return rate of 61% (for comparison purposes only). Sherwin Williams has a current annual dividend yield of 1.70%.
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