Chevron (CVX) PriceWatch Alert Up To 2.40% Downside Protection

Posted on Friday, September 05, 2008 8:07 AM

Chevron (NYSE: CVX) closed yesterday at $81.22. So far the stock has hit a 52-week low of $76.40 and 52-week high of $104.63. Chevron stock has been showing support around 78.58 and resistance in the 85.70 range. Technical indicators for the stock are Bearish and S&P gives CVX a very positive 5 STAR (out of 5) strong buy rating. CVX appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Dec '08 90 covered call (CVX LR) for a net debit in the $79.27 area. That is also the break even stock price for this trade. This covered call has a 106 day duration, provides 2.40% downside protection and a 13.54% assigned return rate for a 46.61% 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 CVX Jan '10 60 Call (WCH AL) and selling the Dec '08 90 call (CVX LR) for a $21.75 debit. The trade has a 106 day life and would provide no downside protection and a 37.93% assigned return rate for a 131.00% annualized return rate (for comparison purposes only). Chevron has a current annual dividend yield of 3.01%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]