Randgold Resources (GOLD) 10/28/09 PriceWatch Alert With 7.01% Downside Protection

Posted: Wednesday, October 28, 2009 8:44 AM EDT

Randgold Resources (NasdaqNM: GOLD) closed yesterday at $69.90. So far the stock has hit a 52-week low of $23.27 and 52-week high of $76.97. Randgold Resources stock has been showing support around 67.96 and resistance in the 71.82 range. Technical indicators for the stock are Bullish and S&P gives GOLD a neutral 3 STAR (out of 5) hold rating. GOLD appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Dec '09 70 covered call (GUD LN) for a net debit in the $65.00 area. That is also the break even stock price for this trade. This covered call has a 52 day duration, provides 7.01% downside protection and a 7.69% assigned return rate for a 53.99% 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 GOLD Jan '11 17.50 Call (VEJ AW) and selling the Dec '09 70 call (GUD LN) for a $48.40 debit. The trade has a 52 day life and would provide 5.72% downside protection and an 8.47% assigned return rate for a 59.00% annualized return rate (for comparison purposes only). Randgold Resources has a current annual dividend yield of 0.17%. [WBA-Seven Summits Research]

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