AES (AES) 10/21/09 PriceWatch Alert At $11.53 Break Even

Posted: Wednesday, October 21, 2009 8:04 AM EDT
By: Market Intelligence Center Staff

AES (NYSE: AES) closed yesterday at $14.83. So far the stock has hit a 52-week low of $4.80 and 52-week high of $15.37. AES stock has been showing support around 14.58 and resistance in the 15.32 range. Technical indicators for the stock are Bullish and S&P gives AES a positive 4 STAR (out of 5) buy rating. AES appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a May '10 12.50 covered call (AES EV) for a net debit in the $11.53 area. That is also the break even stock price for this trade. This covered call has a 213 day duration, provides 22.25% downside protection and an 8.41% assigned return rate for a 14.42% 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 AES Jan '11 2.50 Call (VNU AZ) and selling the May '10 12.50 call (AES EV) for a $9.50 debit. The trade has a 213 day life and would provide 19.08% downside protection and a 5.26% assigned return rate for a 9.00% annualized return rate (for comparison purposes only). AES does not pay dividends at this time. [WBA-Seven Summits Research]