Randgold Resources (GOLD) Trades Up On Large Volume

Posted: Tuesday, November 24, 2009 8:54 AM EDT

Randgold Resources (NasdaqNM: GOLD) closed yesterday at $84.20. So far the stock has hit a 52-week low of $31.70 and 52-week high of $85.96. Randgold Resources stock has been showing support around 81.49 and resistance in the 87.31 range. Technical indicators for the stock are Bullish and S&P gives GOLD a weak 2 STAR (out of 5) sell rating. GOLD appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 85 covered call (GUD AQ) for a net debit in the $78.80 area. That is also the break even stock price for this trade. This covered call has a 53 day duration, provides 6.41% downside protection and a 7.87% assigned return rate for a 54.19% 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 GOLD Jan '11 30 Call (VEJ AF) and selling the Jan '10 85 call (GUD AQ) for a $49.80 debit. The trade has a 53 day life and would provide 5.23% downside protection and a 10.44% assigned return rate for a 72.00% annualized return rate (for comparison purposes only). Randgold Resources has a current annual dividend yield of 0.14%. [ATU-Seven Summits Research]

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