AK Steel (AKS) PriceWatch Alert Targets 49.31% Return

Posted on Friday, August 01, 2008 8:07 AM

AK Steel (NYSE: AKS) closed yesterday at $63.50. 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 49.36 and resistance in the 73.54 range. Technical indicators for the stock are Bullish 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 65 covered call (AKS LM) for a net debit in the $54.60 area. That is also the break even stock price for this trade. This covered call has a 141 day duration, provides 14.02% downside protection and a 19.05% assigned return rate for a 49.31% 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 55 Call (AKS AK) and selling the Dec '08 65 call (AKS LM) for a $6.00 debit. The trade has a 141 day life and would provide 3.94% downside protection and a 66.67% assigned return rate for a 173.00% 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]