Moodys (MCO) Trading In Tight Support/Resistance Range

Posted: Thursday, November 19, 2009 8:44 AM EDT

Moodys (NYSE: MCO) closed yesterday at $23.68. So far the stock has hit a 52-week low of $15.41 and 52-week high of $31.79. Moodys stock has been showing support around 23.34 and resistance in the 23.92 range. Technical indicators for the stock are Bearish and S&P gives MCO a neutral 3 STAR (out of 5) hold rating. MCO appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 21 covered call (MCO ET) for a net debit in the $18.78 area. That is also the break even stock price for this trade. This covered call has an 184 day duration, provides 20.69% downside protection and an 11.82% assigned return rate for a 23.45% 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 MCO Jan '11 10 Call (OWC AB) and selling the May '10 21 call (MCO ET) for a $9.80 debit. The trade has an 184 day life and would provide 16.39% downside protection and a 12.24% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). Moodys has a current annual dividend yield of 1.67%. [THA-Seven Summits Research]

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