Avon Products (NYSE:AVP) closed Monday's seesaw trading session at $25.85. In the past year, the stock has hit a 52-week low of $25.59 and 52-week high of $36.20. Avon Products (AVP) stock has been showing support around $25.14 and resistance in the $26.76 range. Technical indicators for the stock are Bearish and S&P gives Avon Products (AVP) a neutral 3 STARS (out of 5) hold rating. For a hedged play on Avon Products (AVP), look at the Jan '12 $25.00 covered call for a net debit in the $23.55 area. That is also the break-even stock price for this trade. This covered call has a duration of 172 days, provides 8.90% downside protection and an assigned return rate of 6.16% for an annualized return rate of 13.07% (for comparison purposes only). A lower-cost hedged play for Avon Products (AVP) would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the Avon Products (AVP) Jan '13 $20.00 call and selling the Jan '12 $25.00 call for a total debit of $4.40. The trade has a lifespan of 172 days and would provide 5.61% downside protection and an assigned return rate of 13.64% for an annualized return rate of 29% (for comparison purposes only). Avon Products (AVP) has a current annual dividend yield of 3.45%. [ABR-Seven Summits Research]
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