Peabody Energy (BTU) PriceWatch Alert for March 1, 2010

Posted: Monday, March 01, 2010 8:18 AM EDT
By: Market Intelligence Center Staff

Peabody Energy (NYSE: BTU) closed yesterday at $45.97. So far the stock has hit a 52-week low of $20.17 and 52-week high of $52.14. Peabody Energy stock has been showing support around 44.29 and resistance in the 46.93 range. Technical indicators for the stock are Bearish and S&P gives BTU a neutral 3 STAR (out of 5) hold rating. BTU appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 45 covered call for a net debit in the $41.27 area. That is also the break even stock price for this trade. This covered call has an 110 day duration, provides 10.22% downside protection and a 9.04% assigned return rate for a 29.99% 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 BTU Jan '11 30 Call and selling the Jun '10 45 call for a $12.75 debit. The trade has an 110 day life and would provide 7.00% downside protection and a 17.65% assigned return rate for a 59.00% annualized return rate (for comparison purposes only). Peabody Energy has a current annual dividend yield of 0.62%. [ABR-Seven Summits Research]