Schlumberger (SLB) PriceWatch Alert Could Hit 24.57% Return

Posted: Monday, July 06, 2009 8:07 AM EDT

Schlumberger (NYSE: SLB) closed yesterday at $52.55. So far the stock has hit a 52-week low of $35.05 and 52-week high of $108.00. Schlumberger stock has been showing support around 50.44 and resistance in the 54.04 range. Technical indicators for the stock are Bearish and S&P gives SLB a neutral 3 STAR (out of 5) hold rating. SLB appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Nov '09 50 covered call (SLB KJ) for a net debit in the $45.75 area. That is also the break even stock price for this trade. This covered call has a 138 day duration, provides 12.94% downside protection and a 9.29% assigned return rate for a 24.57% 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 '11 25 Call (VWY AE) and selling the Nov '09 50 call (SLB KJ) for a $20.85 debit. The trade has a 138 day life and would provide 12.75% downside protection and a 19.90% assigned return rate for a 53.00% annualized return rate (for comparison purposes only). Schlumberger has a current annual dividend yield of 1.53%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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