Expedia (EXPE) 12/22/09 PriceWatch Alert Could Hit 23.10% Return

Posted: Tuesday, December 22, 2009 8:26 AM EDT
By: Market Intelligence Center Staff

Expedia (NASDAQ: EXPE) closed yesterday at $26.14. So far the stock has hit a 52-week low of $6.31 and 52-week high of $27.37. Expedia stock has been showing support around 24.88 and resistance in the 26.94 range. Technical indicators for the stock are Bullish and S&P gives EXPE a neutral 3 STAR (out of 5) hold rating. EXPE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 25 covered call for a net debit in the $23.29 area. That is also the break even stock price for this trade. This covered call has an 116 day duration, provides 10.90% downside protection and a 7.34% assigned return rate for a 23.10% 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 EXPE Jan '11 12.50 Call and selling the Apr '10 25 call for an $11.20 debit. The trade has an 116 day life and would provide 9.33% downside protection and an 11.61% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Expedia does not pay dividends at this time. [ATU-Seven Summits Research]