CF Industries (CF) 3/12/10 PriceWatch Alert Targets 8.50% Downside Protection

Posted: Friday, March 12, 2010 8:29 AM EDT
By: Market Intelligence Center Staff

CF Industries (NYSE: CF) closed yesterday at $100.61. So far the stock has hit a 52-week low of $64.84 and 52-week high of $110.00. CF Industries stock has been showing support around 98.79 and resistance in the 103.45 range. Technical indicators for the stock are Bullish and S&P gives CF a neutral 3 STAR (out of 5) hold rating. CF appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 100 covered call for a net debit in the $92.06 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 8.50% downside protection and an 8.62% assigned return rate for a 44.34% 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 CF Jan '11 60 Call and selling the May '10 100 call for a $34.50 debit. The trade has a 71 day life and would provide 6.07% downside protection and a 15.94% assigned return rate for an 82.00% annualized return rate (for comparison purposes only). CF Industries has a current annual dividend yield of 0.39%. [FBB-Seven Summits Research]