Cemex (CX) 10/19/09 PriceWatch Alert Up To 18.77% Downside Protection

Posted: Monday, October 19, 2009 8:03 AM EDT

Cemex (NYSE: CX) ended the last trading session at $13.32. So far the stock has hit a 52-week low of $3.94 and 52-week high of $14.58. Cemex stock has been showing support around 13.03 and resistance in the 13.85 range. Technical indicators for the stock are Bullish. CX appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 12 covered call (CX DL) for a net debit in the $10.82 area. That is also the break even stock price for this trade. This covered call has an 180 day duration, provides 18.77% downside protection and a 10.91% assigned return rate for a 22.11% 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 CX Jan '11 5 Call (OXX AA) and selling the Apr '10 12 call (CX DL) for a $6.30 debit. The trade has an 180 day life and would provide 15.17% downside protection and an 11.11% assigned return rate for a 23.00% annualized return rate (for comparison purposes only). Cemex does not pay dividends at this time. [ABR-Seven Summits Research]

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