Barrick Gold (ABX) 11/19/09 PriceWatch Alert Targets 10.40% Downside Protection

Posted: Thursday, November 19, 2009 8:39 AM EDT

Barrick Gold (NYSE: ABX) closed yesterday at $43.74. So far the stock has hit a 52-week low of $20.04 and 52-week high of $45.60. Barrick Gold stock has been showing support around 42.19 and resistance in the 46.37 range. Technical indicators for the stock are Bullish and S&P gives ABX a neutral 3 STAR (out of 5) hold rating. ABX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 45 covered call (ABX DI) for a net debit in the $39.19 area. That is also the break even stock price for this trade. This covered call has a 149 day duration, provides 10.40% downside protection and a 14.83% assigned return rate for a 36.32% 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 ABX Jan '11 25 Call (VBX AE) and selling the Apr '10 45 call (ABX DI) for a $15.40 debit. The trade has a 149 day life and would provide 7.64% downside protection and a 29.87% assigned return rate for a 73.00% annualized return rate (for comparison purposes only). Barrick Gold has a current annual dividend yield of 0.91%. [THA-Seven Summits Research]

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