NRG Energy (NRG) PriceWatch Alert Targets 25.46% Return

Posted: Thursday, July 02, 2009 8:07 AM EDT

NRG Energy (NYSE: NRG) closed yesterday at $26.05. So far the stock has hit a 52-week low of $14.39 and 52-week high of $43.95. NRG Energy stock has been showing support around 24.88 and resistance in the 26.78 range. Technical indicators for the stock are Bullish and S&P gives NRG a positive 4 STAR (out of 5) buy rating. NRG appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Dec '09 25 covered call (NRG LE) for a net debit in the $22.35 area. That is also the break even stock price for this trade. This covered call has a 170 day duration, provides 14.20% downside protection and an 11.86% assigned return rate for a 25.46% 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 NRG Jan '11 12.50 Call (OBD AR) and selling the Dec '09 25 call (NRG LE) for an $11.00 debit. The trade has a 170 day life and would provide 9.79% downside protection and a 13.64% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). NRG Energy does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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