Southern Copper (PCU) 11/13/09 PriceWatch Alert With Support Around $32.93

Posted: Friday, November 13, 2009 8:39 AM EDT

Southern Copper (NYSE: PCU) closed yesterday at $33.95. So far the stock has hit a 52-week low of $9.12 and 52-week high of $36.39. Southern Copper stock has been showing support around 32.93 and resistance in the 35.57 range. Technical indicators for the stock are Bullish. PCU appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Mar '10 30 covered call (PCU CF) for a net debit in the $28.15 area. That is also the break even stock price for this trade. This covered call has a 127 day duration, provides 17.08% downside protection and a 6.57% assigned return rate for an 18.89% 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 PCU Jan '11 17.50 Call (XBW AW) and selling the Mar '10 30 call (PCU CF) for an $11.30 debit. The trade has a 127 day life and would provide 15.17% downside protection and a 10.62% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). Southern Copper has a current annual dividend yield of 2.07%. [FBB-Seven Summits Research]

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