Schlumberger (SLB) PriceWatch Alert At $78.29 Break Even

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

Schlumberger (NYSE: SLB) ended the last trading session at $85.79. So far the stock has hit a 52-week low of $72.30 and 52-week high of $114.84. Schlumberger stock has been showing support around 82.15 and resistance in the 89.27 range. Technical indicators for the stock are Bearish and S&P gives SLB a positive 4 STAR (out of 5) buy rating. SLB appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Nov '08 85 covered call (SLB KQ) for a net debit in the $78.29 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 8.74% downside protection and an 8.57% assigned return rate for a 41.71% 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 SLB Jan '10 40 Call (WUB AH) and selling the Nov '08 85 call (SLB KQ) for a $39.60 debit. The trade has a 75 day life and would provide 7.22% downside protection and a 13.64% assigned return rate for a 66.00% annualized return rate (for comparison purposes only). Schlumberger has a current annual dividend yield of 0.93%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]