Massey Energy (MEE) 11/23/09 PriceWatch Alert At $31.59 Break Even

Posted: Monday, November 23, 2009 8:32 AM EDT

Massey Energy (NYSE: MEE) closed yesterday at $37.99. So far the stock has hit a 52-week low of $9.62 and 52-week high of $41.14. Massey Energy stock has been showing support around 35.95 and resistance in the 39.03 range. Technical indicators for the stock are Bullish and S&P gives MEE a weak 2 STAR (out of 5) sell rating. MEE appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 36 covered call (MQO DJ) for a net debit in the $31.59 area. That is also the break even stock price for this trade. This covered call has a 145 day duration, provides 16.85% downside protection and a 13.96% assigned return rate for a 35.14% 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 MEE Jan '11 15 Call (VHK AC) and selling the Apr '10 36 call (MQO DJ) for a $17.45 debit. The trade has a 145 day life and would provide 14.58% downside protection and a 20.34% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Massey Energy has a current annual dividend yield of 0.61%. [ABR-Seven Summits Research]

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