Energy East (EAS) PriceWatch Alert Targets 14.03% Return

Posted on Monday, August 11, 2008 8:07 AM

Energy East (NYSE: EAS) ended the last trading session at $25.71. So far the stock has hit a 52-week low of $22.26 and 52-week high of $27.90. Energy East stock has been showing support around 24.95 and resistance in the 26.47 range. Technical indicators for the stock are Bullish and S&P gives EAS a neutral 3 STAR (out of 5) hold rating. EAS appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '09 25 covered call (EAS AE) for a net debit in the $23.56 area. That is also the break even stock price for this trade. This covered call has a 159 day duration, provides 8.36% downside protection and a 6.11% assigned return rate for a 14.03% 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 EAS Jan '09 20 Call (EAS AD) and selling the Jan '09 25 call (EAS AE) for a $4.70 debit. The trade has a 159 day life and would provide 3.93% downside protection and a 6.38% assigned return rate for a 15.00% annualized return rate (for comparison purposes only). Energy East has a current annual dividend yield of 4.94%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]