Lexmark International (LXK) Near Its 52 Week High On Heavy Volume

Posted: Tuesday, November 17, 2009 8:52 AM EDT

Lexmark International (NYSE: LXK) closed yesterday at $27.08. So far the stock has hit a 52-week low of $14.23 and 52-week high of $29.16. Lexmark International stock has been showing support around 26.01 and resistance in the 27.63 range. Technical indicators for the stock are Bullish and S&P gives LXK a positive 4 STAR (out of 5) buy rating. LXK appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 25 covered call (LXK DE) for a net debit in the $23.08 area. That is also the break even stock price for this trade. This covered call has a 151 day duration, provides 14.77% downside protection and an 8.32% assigned return rate for a 20.11% 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 LXK Jan '11 15 Call (VEM AC) and selling the Apr '10 25 call (LXK DE) for an $8.80 debit. The trade has a 151 day life and would provide 12.11% downside protection and a 13.64% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). Lexmark International does not pay dividends at this time. [ATU-Seven Summits Research]

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