SunPower Corporation (SPWRA) 10/27/09 PriceWatch Alert Could Hit 25.96% Return

Posted: Tuesday, October 27, 2009 8:35 AM EDT
By: Market Intelligence Center Staff

SunPower Corporation (NasdaqNM: SPWRA) closed yesterday at $27.07. So far the stock has hit a 52-week low of $18.50 and 52-week high of $52.22. SunPower stock has been showing support around 25.78 and resistance in the 29.52 range. Technical indicators for the stock are Bearish and S&P gives SPWRA a neutral 3 STAR (out of 5) hold rating. SPWRA appears on the Investors Observer Stocks In The News list. SPWRA fell almost 15% Friday after the company lowered its fiscal-2009 earnings forecast due to challenging financing markets. For a hedged play on this stock, look at a Mar '10 24 covered call (QRU CX) for a net debit in the $21.77 area. That is also the break even stock price for this trade. This covered call has a 144 day duration, provides 19.58% downside protection and a 10.24% assigned return rate for a 25.96% 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 SPWRA Jan '11 10 Call (ZZR AB) and selling the Mar '10 24 call (QRU CX) for a $13.00 debit. The trade has a 144 day life and would provide 15.04% downside protection and a 7.69% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). SunPower does not pay dividends at this time. [ATU-Seven Summits Research]