ConocoPhillips (COP) 11/23/09 PriceWatch Alert With 3.48% Downside Protection

Posted: Monday, November 23, 2009 8:33 AM EDT

ConocoPhillips (NYSE: COP) closed yesterday at $52.08. So far the stock has hit a 52-week low of $34.12 and 52-week high of $57.44. ConocoPhillips stock has been showing support around 51.17 and resistance in the 53.01 range. Technical indicators for the stock are Bullish and S&P gives COP a very positive 5 STAR (out of 5) strong buy rating. COP appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Feb '10 55 covered call (COP BK) for a net debit in the $50.27 area. That is also the break even stock price for this trade. This covered call has an 89 day duration, provides 3.48% downside protection and a 9.41% assigned return rate for a 38.59% 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 COP Jan '11 40 Call (OJP AH) and selling the Feb '10 55 call (COP BK) for a $12.14 debit. The trade has an 89 day life and would provide no downside protection and a 23.56% assigned return rate for a 97.00% annualized return rate (for comparison purposes only). ConocoPhillips has a current annual dividend yield of 3.73%. [ABR-Seven Summits Research]

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