CF Industries (CF) PriceWatch Alert Targets 13.03% Downside Protection

Posted on Monday, September 08, 2008 8:07 AM

CF Industries (NYSE: CF) ended the last trading session at $131.20. 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 114.49 and resistance in the 140.03 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 '08 130 covered call (CF KU) for a net debit in the $114.10 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 13.03% downside protection and a 13.94% assigned return rate for a 67.82% 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 '08 130 call (CF KU) for a $77.05 debit. The trade has a 75 day life and would provide 10.79% downside protection and a 16.81% assigned return rate for an 82.00% annualized return rate (for comparison purposes only). CF Industries has a current annual dividend yield of 0.29%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]