Southern Copper (PCU) 2/9/10 PriceWatch Alert Could Hit 18.56% Return

Posted: Tuesday, February 09, 2010 8:44 AM EDT
By: Market Intelligence Center Staff

Southern Copper (NYSE: PCU) closed yesterday at $27.35. So far the stock has hit a 52-week low of $12.60 and 52-week high of $36.98. Southern Copper stock has been showing support around 26.32 and resistance in the 29.24 range. Technical indicators for the stock are Bearish. PCU appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jun '10 25 covered call for a net debit in the $23.45 area. That is also the break even stock price for this trade. This covered call has a 130 day duration, provides 14.26% downside protection and a 6.61% assigned return rate for an 18.56% 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 PCU Jan '11 15 Call and selling the Jun '10 25 call for a $9.30 debit. The trade has a 130 day life and would provide 11.15% downside protection and a 7.53% assigned return rate for a 21.00% annualized return rate (for comparison purposes only). Southern Copper has a current annual dividend yield of 2.69%. [ATU-Seven Summits Research]