Smith International (SII) Nearing Its 52 Week High On Heavy Volume

Posted: Monday, March 22, 2010 9:15 AM EDT
By: Market Intelligence Center Staff

Smith International (NYSE: SII) ended the last trading session at $43.31. So far the stock has hit a 52-week low of $20.50 and 52-week high of $45.32. Smith International stock has been showing support around 42.14 and resistance in the 45.00 range. Technical indicators for the stock are Bullish and S&P gives SII a neutral 3 STAR (out of 5) hold rating. SII appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jul '10 43 covered call for a net debit in the $39.81 area. That is also the break even stock price for this trade. This covered call has an 117 day duration, provides 8.08% downside protection and an 8.01% assigned return rate for a 25.00% 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 SII Jan '11 30 Call and selling the Jul '10 43 call for an $11.70 debit. The trade has an 117 day life and would provide 3.72% downside protection and an 11.11% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). Smith International has a current annual dividend yield of 1.06%. [ABR-Seven Summits Research]