Agrium (AGU) 2/9/10 PriceWatch Alert Could Hit 33.99% Return

Posted: Tuesday, February 09, 2010 8:40 AM EDT
By: Market Intelligence Center Staff

Agrium (NYSE: AGU) closed yesterday at $57.77. So far the stock has hit a 52-week low of $29.59 and 52-week high of $71.11. Agrium stock has been showing support around 56.33 and resistance in the 60.59 range. Technical indicators for the stock are Bearish. AGU appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 55 covered call for a net debit in the $51.77 area. That is also the break even stock price for this trade. This covered call has a 67 day duration, provides 10.39% downside protection and a 6.24% assigned return rate for a 33.99% 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 AGU Jan '11 30 Call and selling the Apr '10 55 call for a $23.05 debit. The trade has a 67 day life and would provide 8.17% downside protection and an 8.46% assigned return rate for a 46.00% annualized return rate (for comparison purposes only). Agrium has a current annual dividend yield of 0.19%. [ATU-Seven Summits Research]