PACCAR (PCAR) 10/26/09 PriceWatch Alert Could Hit 38.57% Return

Posted: Monday, October 26, 2009 8:15 AM EDT
By: Market Intelligence Center Staff

PACCAR (NasdaqNM: PCAR) ended the last trading session at $39.06. So far the stock has hit a 52-week low of $20.38 and 52-week high of $40.26. PACCAR stock has been showing support around 38.47 and resistance in the 39.85 range. Technical indicators for the stock are Bullish and S&P gives PCAR a neutral 3 STAR (out of 5) hold rating. PCAR appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 40 covered call (PAQ AH) for a net debit in the $36.81 area. That is also the break even stock price for this trade. This covered call has an 82 day duration, provides 5.76% downside protection and an 8.67% assigned return rate for a 38.57% 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 PCAR Jan '11 20 Call (OKG AD) and selling the Jan '10 40 call (PAQ AH) for a $17.80 debit. The trade has an 82 day life and would provide 3.23% downside protection and a 12.36% assigned return rate for a 55.00% annualized return rate (for comparison purposes only). PACCAR has a current annual dividend yield of 0.91%. [ABR-Seven Summits Research]