Archer Daniels Midland (ADM) PriceWatch Alert Targets 23.31% Return

Posted on Monday, September 22, 2008 8:07 AM

Archer Daniels Midland (NYSE: ADM) ended the last trading session at $23.68. So far the stock has hit a 52-week low of $19.70 and 52-week high of $48.95. Archer Daniels Midland stock has been showing support around 18.47 and resistance in the 26.57 range. Technical indicators for the stock are Bearish and S&P gives ADM a positive 4 STAR (out of 5) buy rating. ADM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '09 22.50 covered call (ADM CX) for a net debit in the $20.18 area. That is also the break even stock price for this trade. This covered call has an 180 day duration, provides 14.78% downside protection and an 11.50% assigned return rate for a 23.31% 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 ADM Jan '10 15 Call (WRA AC) and selling the Mar '09 22.50 call (ADM CX) for a $6.30 debit. The trade has an 180 day life and would provide 10.05% downside protection and a 19.05% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). Archer Daniels Midland has a current annual dividend yield of 2.44%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]