Schlumberger (SLB) 11/20/09 PriceWatch Alert With Support Around $62.73

Posted: Friday, November 20, 2009 8:34 AM EDT

Schlumberger (NYSE: SLB) closed yesterday at $64.54. So far the stock has hit a 52-week low of $35.05 and 52-week high of $71.10. Schlumberger stock has been showing support around 62.73 and resistance in the 67.23 range. Technical indicators for the stock are Bullish and S&P gives SLB a weak 2 STAR (out of 5) sell rating. SLB appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 60 covered call (SLB AL) for a net debit in the $58.04 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 10.07% downside protection and a 3.38% assigned return rate for a 21.62% 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 SLB Jan '11 30 Call (VWY AF) and selling the Jan '10 60 call (SLB AL) for a $28.65 debit. The trade has a 57 day life and would provide 9.13% downside protection and a 4.71% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Schlumberger has a current annual dividend yield of 1.25%. [FBB-Seven Summits Research]

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