Diamond Offshore Drilling (DO) PriceWatch Alert Up To 9.18% Downside Protection

Posted on Monday, October 06, 2008 8:07 AM

Diamond Offshore Drilling (NYSE: DO) ended the last trading session at $93.73. So far the stock has hit a 52-week low of $90.72 and 52-week high of $149.30. Diamond Offshore Drilling stock has been showing support around 88.93 and resistance in the 101.91 range. Technical indicators for the stock are Bearish and S&P gives DO a positive 4 STAR (out of 5) buy rating. DO appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Dec '08 95 covered call (DO LS) for a net debit in the $85.13 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 9.18% downside protection and an 11.59% assigned return rate for a 56.42% 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 DO Jan '10 55 Call (WFJ AK) and selling the Dec '08 95 call (DO LS) for a $33.00 debit. The trade has a 75 day life and would provide 6.11% downside protection and a 21.21% assigned return rate for a 103.00% annualized return rate (for comparison purposes only). Diamond Offshore Drilling has a current annual dividend yield of 0.50%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]