National Oilwell Varco (NOV) 11/23/09 PriceWatch Alert With $39.09 Break Even

Posted: Monday, November 23, 2009 8:31 AM EDT

National Oilwell Varco (NYSE: NOV) closed yesterday at $42.79. So far the stock has hit a 52-week low of $17.85 and 52-week high of $50.17. National Oilwell Varco stock has been showing support around 41.61 and resistance in the 44.27 range. Technical indicators for the stock are Bearish and S&P gives NOV a positive 4 STAR (out of 5) buy rating. NOV appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Feb '10 43 covered call (NON BQ) for a net debit in the $39.09 area. That is also the break even stock price for this trade. This covered call has an 89 day duration, provides 8.65% downside protection and a 10.00% assigned return rate for a 41.02% 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 NOV Jan '11 20 Call (OKP AD) and selling the Feb '10 43 call (NON BQ) for a $19.90 debit. The trade has an 89 day life and would provide 6.75% downside protection and a 15.58% assigned return rate for a 64.00% annualized return rate (for comparison purposes only). National Oilwell Varco does not pay dividends at this time. [ABR-Seven Summits Research]

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