Peabody Energy (BTU) 3/11/10 PriceWatch Alert At $44.28 Break Even

Posted: Thursday, March 11, 2010 8:19 AM EDT
By: Market Intelligence Center Staff

Peabody Energy (NYSE: BTU) closed yesterday at $48.53. So far the stock has hit a 52-week low of $23.50 and 52-week high of $52.14. Peabody Energy stock has been showing support around 47.18 and resistance in the 49.54 range. Technical indicators for the stock are Bullish 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 48 covered call for a net debit in the $44.28 area. That is also the break even stock price for this trade. This covered call has a 100 day duration, provides 8.76% downside protection and an 8.40% assigned return rate for a 30.66% 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 48 call for a $15.45 debit. The trade has a 100 day life and would provide 6.35% downside protection and a 16.50% assigned return rate for a 60.00% annualized return rate (for comparison purposes only). Peabody Energy has a current annual dividend yield of 0.58%. [THA-Seven Summits Research]