AES (AES) NewsBite

Posted on Monday, April 07, 2008 9:03 AM

AES (NYSE: AES) ended the last trading session at $17.06. So far the stock has hit a 52-week low of $15.70 and 52-week high of $24.24. AES stock has been showing support around 16.57 and resistance in the 17.73 range. Technical indicators for the stock are Bearish and S&P gives AES a positive 4 STAR (out of 5) buy rating. For a hedged play on this stock, look at a Nov '08 15 covered call (AES KC) for a net debit in the $13.76 area. That is also the break even stock price for this trade. This covered call has a 229 day duration, provides 19.34% downside protection and a 9.01% assigned return rate for a 14.36% 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 AES Jan '09 10 Call (VNU AB) and selling the Nov '08 15 call (AES KC) for a $4.40 debit. The trade has a 229 day life and would provide 15.59% downside protection and a 13.64% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). AES does not pay dividends at this time. [IHF - Investors Observer]