Potash (POT) PriceWatch Alert Down To $86.00 Break Even

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

Potash (NYSE: POT) closed yesterday at $96.00. So far the stock has hit a 52-week low of $47.54 and 52-week high of $229.95. Potash stock has been showing support around 85.67 and resistance in the 102.91 range. Technical indicators for the stock are Neutral and S&P gives POT a weak 2 STAR (out of 5) sell rating. POT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Sep '09 95 covered call (PYP IS) for a net debit in the $86.00 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 10.42% downside protection and a 10.47% assigned return rate for a 50.93% 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 POT Jan '11 25 Call (VPT AE) and selling the Sep '09 95 call (PYP IS) for a $62.55 debit. The trade has a 75 day life and would provide 8.80% downside protection and an 11.91% assigned return rate for a 58.00% annualized return rate (for comparison purposes only). Potash has a current annual dividend yield of 0.42%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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