American International Group (AIG) PriceWatch Alert for September 16, 2009

Posted: Wednesday, September 16, 2009 8:17 AM EDT
By: Market Intelligence Center Staff

American International Group (NYSE: AIG) closed yesterday at $38.80. So far the stock has hit a 52-week low of $6.60 and 52-week high of $114.00. American International Group stock has been showing support around 35.01 and resistance in the 44.95 range. Technical indicators for the stock are Bullish and S&P gives AIG a weak 2 STAR (out of 5) sell rating. AIG appears on the Investors Observer Stocks In The News list. The Wall Street Journal reported Tuesday that AIG's airplane-finance company, International Lease Finance Corp., could have trouble meeting upcoming debt obligations. According to the paper, the company is facing a liquidity shortfall of around $5 to $6 billion. For a hedged play on this stock, look at a Nov '09 26 covered call (AIG KZ) for a net debit in the $24.30 area. That is also the break even stock price for this trade. This covered call has a 66 day duration, provides 37.37% downside protection and a 7.00% assigned return rate for a 38.69% 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 AIG Jan '11 12.50 Call (VAF AV) and selling the Nov '09 26 call (AIG KZ) for a $12.35 debit. The trade has a 66 day life and would provide 35.95% downside protection and a 9.31% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). American International Group does not pay dividends at this time. [WBA-Seven Summits Research] For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo