Petroleo Brasileiro (PBR) 2/9/10 PriceWatch Alert At $35.43 Break Even

Posted: Tuesday, February 09, 2010 8:18 AM EDT
By: Market Intelligence Center Staff

Petroleo Brasileiro (NYSE: PBR) closed yesterday at $38.20. So far the stock has hit a 52-week low of $24.47 and 52-week high of $53.46. Petroleo Brasileiro stock has been showing support around 37.15 and resistance in the 40.05 range. Technical indicators for the stock are Bearish and S&P gives PBR a neutral 3 STAR (out of 5) hold rating. PBR appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jul '10 40 covered call for a net debit in the $35.43 area. That is also the break even stock price for this trade. This covered call has a 158 day duration, provides 7.25% downside protection and a 12.90% assigned return rate for a 29.80% 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 PBR Jan '11 30 Call and selling the Jul '10 40 call for a $7.18 debit. The trade has a 158 day life and would provide 2.67% downside protection and a 39.28% assigned return rate for a 91.00% annualized return rate (for comparison purposes only). Petroleo Brasileiro has a current annual dividend yield of 0.92%. [ATU-Seven Summits Research]