AK Steel (AKS) PriceWatch Alert Could Hit 50.49% Return

Posted on Thursday, July 31, 2008 8:07 AM

AK Steel (NYSE: AKS) closed yesterday at $59.35. So far the stock has hit a 52-week low of $27.90 and 52-week high of $73.07. AK Steel stock has been showing support around 55.08 and resistance in the 61.82 range. Technical indicators for the stock are Neutral and S&P gives AKS a positive 4 STAR (out of 5) buy rating. AKS appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Dec '08 60 covered call (AKS LL) for a net debit in the $50.15 area. That is also the break even stock price for this trade. This covered call has a 142 day duration, provides 15.50% downside protection and a 19.64% assigned return rate for a 50.49% 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 AKS Jan '09 50 Call (AKS AJ) and selling the Dec '08 60 call (AKS LL) for a $6.10 debit. The trade has a 142 day life and would provide 5.48% downside protection and a 63.93% assigned return rate for a 164.00% annualized return rate (for comparison purposes only). AK Steel has a current annual dividend yield of 0.40%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]