Apollo Group (APOL) 3/17/10 PriceWatch Alert With 6.50% Downside Protection

Posted: Wednesday, March 17, 2010 8:15 AM EDT
By: Market Intelligence Center Staff

Apollo Group (NASDAQ: APOL) closed yesterday at $64.65. So far the stock has hit a 52-week low of $52.79 and 52-week high of $81.20. Apollo Group stock has been showing support around 62.64 and resistance in the 65.80 range. Technical indicators for the stock are Bullish and S&P gives APOL a neutral 3 STAR (out of 5) hold rating. APOL appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a May '10 65 covered call for a net debit in the $60.45 area. That is also the break even stock price for this trade. This covered call has a 66 day duration, provides 6.50% downside protection and a 7.53% assigned return rate for a 41.63% 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 APOL Jan '11 35 Call and selling the May '10 65 call for a $26.80 debit. The trade has a 66 day life and would provide 4.41% downside protection and an 11.94% assigned return rate for a 66.00% annualized return rate (for comparison purposes only). Apollo Group does not pay dividends at this time. [WBA-Seven Summits Research]