Mirant (MIR) PriceWatch Alert With $25.69 Break Even

Posted on Thursday, August 14, 2008 8:07 AM

Mirant (NYSE: MIR) closed yesterday at $29.29. So far the stock has hit a 52-week low of $26.96 and 52-week high of $44.61. Mirant stock has been showing support around 26.25 and resistance in the 30.97 range. Technical indicators for the stock are Bearish and S&P gives MIR a positive 4 STAR (out of 5) buy rating. MIR appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '09 30 covered call (MIR CF) for a net debit in the $25.69 area. That is also the break even stock price for this trade. This covered call has a 219 day duration, provides 12.29% downside protection and a 16.78% assigned return rate for a 27.96% 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 MIR Jan '09 27.50 Call (MIR AY) and selling the Mar '09 30 call (MIR CF) for a $0.85 debit. The trade has a 219 day life and would provide 3.21% downside protection and a 194.12% assigned return rate for a 324.00% annualized return rate (for comparison purposes only). Mirant does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]