Amylin Pharmaceuticals (AMLN) 10/9/09 PriceWatch Alert Targets 33.55% Downside Protection

Posted: Friday, October 09, 2009 8:23 AM EDT

Amylin Pharmaceuticals (NasdaqNM: AMLN) closed yesterday at $13.71. So far the stock has hit a 52-week low of $5.50 and 52-week high of $15.90. Amylin Pharmaceuticals stock has been showing support around 13.36 and resistance in the 14.00 range. Technical indicators for the stock are Bullish and S&P gives AMLN a neutral 3 STAR (out of 5) hold rating. AMLN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 10 covered call (AQM DB) for a net debit in the $9.11 area. That is also the break even stock price for this trade. This covered call has a 190 day duration, provides 33.55% downside protection and a 9.77% assigned return rate for an 18.77% 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 AMLN Jan '11 5 Call (OGA AA) and selling the Apr '10 10 call (AQM DB) for a $4.70 debit. The trade has a 190 day life and would provide 29.25% downside protection and a 6.38% assigned return rate for a 12.00% annualized return rate (for comparison purposes only). Amylin Pharmaceuticals does not pay dividends at this time. [FBB-Seven Summits Research]

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