Assured Guaranty (AGO) Trading In Tight Support/Resistance Range

Posted: Thursday, March 18, 2010 9:27 AM EDT
By: Market Intelligence Center Staff

Assured Guaranty (NYSE: AGO) closed yesterday at $21.91. So far the stock has hit a 52-week low of $5.12 and 52-week high of $28.14. Assured Guaranty stock has been showing support around 21.16 and resistance in the 22.70 range. Technical indicators for the stock are Bullish and S&P gives AGO a neutral 3 STAR (out of 5) hold rating. AGO appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '11 20 covered call for a net debit in the $17.21 area. That is also the break even stock price for this trade. This covered call has a 310 day duration, provides 21.45% downside protection and a 16.21% assigned return rate for a 19.09% 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 AGO Jan '11 15 Call and selling the Jan '11 20 call for a $3.80 debit. The trade has a 310 day life and would provide 14.19% downside protection and a 31.58% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Assured Guaranty has a current annual dividend yield of 0.83%. [THA-Seven Summits Research]