Southwestern Energy (SWN) Down Over 1% On High Volume

Posted: Wednesday, November 11, 2009 8:55 AM EDT

Southwestern Energy (NYSE: SWN) closed yesterday at $45.51. So far the stock has hit a 52-week low of $22.76 and 52-week high of $50.61. Southwestern Energy stock has been showing support around 44.23 and resistance in the 47.05 range. Technical indicators for the stock are Bullish and S&P gives SWN a neutral 3 STAR (out of 5) hold rating. SWN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 45 covered call (TKQ AI) for a net debit in the $41.81 area. That is also the break even stock price for this trade. This covered call has a 66 day duration, provides 8.13% downside protection and a 7.63% assigned return rate for a 42.19% annualized return rate (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 SWN Jan '11 15 Call (ZFK AC) and selling the Jan '10 45 call (TKQ AI) for a $27.40 debit. The trade has a 66 day life and would provide 6.83% downside protection and a 9.49% assigned return rate for a 52.00% annualized return rate (for comparison purposes only). Southwestern Energy does not pay dividends at this time. [WBA-Seven Summits Research]

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