Sunoco (SUN) PriceWatch Alert Targets 21.42% Return

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

Sunoco (NYSE: SUN) closed yesterday at $23.20. So far the stock has hit a 52-week low of $21.30 and 52-week high of $49.44. Sunoco stock has been showing support around 22.32 and resistance in the 23.76 range. Technical indicators for the stock are Bearish and S&P gives SUN a neutral 3 STAR (out of 5) hold rating. SUN appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 22.50 covered call (SUN AX) for a net debit in the $20.20 area. That is also the break even stock price for this trade. This covered call has a 194 day duration, provides 12.93% downside protection and an 11.39% assigned return rate for a 21.42% 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 SUN Jan '11 15 Call (VUN AC) and selling the Jan '10 22.50 call (SUN AX) for a $5.60 debit. The trade has a 194 day life and would provide 11.21% downside protection and a 33.93% assigned return rate for a 64.00% annualized return rate (for comparison purposes only). Sunoco has a current annual dividend yield of 5.15%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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