Weatherford International (WFT) 3/19/10 PriceWatch Alert Up To 13.37% Downside Protection

Posted: Friday, March 19, 2010 8:36 AM EDT
By: Market Intelligence Center Staff

Weatherford International (NYSE: WFT) closed yesterday at $16.98. So far the stock has hit a 52-week low of $10.50 and 52-week high of $23.74. Weatherford International stock has been showing support around 16.43 and resistance in the 17.73 range. Technical indicators for the stock are Bearish and S&P gives WFT a positive 4 STAR (out of 5) buy rating. WFT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Aug '10 16 covered call for a net debit in the $14.71 area. That is also the break even stock price for this trade. This covered call has a 155 day duration, provides 13.37% downside protection and an 8.77% assigned return rate for a 20.65% 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 WFT Jan '11 10 Call and selling the Aug '10 16 call for a $5.18 debit. The trade has a 155 day life and would provide 10.60% downside protection and a 15.83% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Weatherford International does not pay dividends at this time. [FBB-Seven Summits Research]