Oracle (ORCL) PriceWatch Alert With 10.97% Downside Protection

Posted on Thursday, August 28, 2008 8:07 AM

Oracle (NasdaqNM: ORCL) closed yesterday at $22.34. So far the stock has hit a 52-week low of $18.18 and 52-week high of $23.62. Oracle stock has been showing support around 21.91 and resistance in the 22.79 range. Technical indicators for the stock are Bullish and S&P gives ORCL a very positive 5 STAR (out of 5) strong buy rating. ORCL appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '08 21 covered call (ORQ LY) for a net debit in the $19.89 area. That is also the break even stock price for this trade. This covered call has an 114 day duration, provides 10.97% downside protection and a 5.58% assigned return rate for a 17.87% 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 ORCL Jan '10 10 Call (WOQ AB) and selling the Dec '08 21 call (ORQ LY) for a $10.60 debit. The trade has an 114 day life and would provide 7.79% downside protection and a 3.77% assigned return rate for a 12.00% annualized return rate (for comparison purposes only). Oracle 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]