Southern Copper (PCU) 11/23/09 PriceWatch Alert Targets 18.07% Downside Protection

Posted: Monday, November 23, 2009 8:26 AM EDT

Southern Copper (NYSE: PCU) closed yesterday at $34.87. So far the stock has hit a 52-week low of $9.56 and 52-week high of $36.39. Southern Copper stock has been showing support around 33.82 and resistance in the 35.42 range. Technical indicators for the stock are Bullish. PCU appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Mar '10 30 covered call (PCU CF) for a net debit in the $28.57 area. That is also the break even stock price for this trade. This covered call has an 117 day duration, provides 18.07% downside protection and a 5.01% assigned return rate for a 15.61% 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 PCU Jan '11 15 Call (XBW AC) and selling the Mar '10 30 call (PCU CF) for a $13.65 debit. The trade has an 117 day life and would provide 17.84% downside protection and a 9.89% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). Southern Copper has a current annual dividend yield of 2.04%. [ABR-Seven Summits Research]

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