Oracle (ORCL) 10/27/09 PriceWatch Alert At $19.84 Break Even

Posted: Tuesday, October 27, 2009 8:46 AM EDT
By: Market Intelligence Center Staff

Oracle (NasdaqNM: ORCL) closed yesterday at $21.99. So far the stock has hit a 52-week low of $13.80 and 52-week high of $22.95. Oracle stock has been showing support around 21.54 and resistance in the 22.60 range. Technical indicators for the stock are Bullish and S&P gives ORCL a neutral 3 STAR (out of 5) hold rating. ORCL appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Mar '10 21 covered call (ORQ CY) for a net debit in the $19.84 area. That is also the break even stock price for this trade. This covered call has a 144 day duration, provides 9.78% downside protection and a 5.85% assigned return rate for a 14.82% 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 ORCL Jan '11 12.50 Call (VOC AV) and selling the Mar '10 21 call (ORQ CY) for a $7.70 debit. The trade has a 144 day life and would provide 8.14% downside protection and a 10.39% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Oracle has a current annual dividend yield of 0.90%. [ATU-Seven Summits Research]