CF Industries (CF) PriceWatch Alert With $119.82 Break Even

Posted on Wednesday, September 03, 2008 8:07 AM

CF Industries (NYSE: CF) ended the last trading session at $138.02. So far the stock has hit a 52-week low of $60.14 and 52-week high of $172.99. CF Industries stock has been showing support around 131.45 and resistance in the 150.21 range. Technical indicators for the stock are Bearish and S&P gives CF a neutral 3 STAR (out of 5) hold rating. CF appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Nov '08 135 covered call (CF KV) for a net debit in the $119.82 area. That is also the break even stock price for this trade. This covered call has an 80 day duration, provides 13.19% downside protection and a 12.67% assigned return rate for a 57.80% 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 CF Jan '10 40 Call (KDJ AH) and selling the Nov '08 135 call (CF KV) for an $82.45 debit. The trade has an 80 day life and would provide 11.28% downside protection and a 15.22% assigned return rate for a 69.00% annualized return rate (for comparison purposes only). CF Industries has a current annual dividend yield of 0.27%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]