Agnico Eagle Mines (AEM) 10/28/09 PriceWatch Alert Targets 12.00% Downside Protection

Posted: Wednesday, October 28, 2009 8:37 AM EDT
By: Market Intelligence Center Staff

Agnico Eagle Mines (NYSE: AEM) closed yesterday at $65.00. So far the stock has hit a 52-week low of $21.62 and 52-week high of $74.00. Agnico Eagle Mines stock has been showing support around 63.05 and resistance in the 67.43 range. Technical indicators for the stock are Bearish. AEM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Dec '09 60 covered call (AEM LL) for a net debit in the $57.20 area. That is also the break even stock price for this trade. This covered call has a 52 day duration, provides 12.00% downside protection and a 4.90% assigned return rate for a 34.36% 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 AEM Jan '11 20 Call (ZZJ AD) and selling the Dec '09 60 call (AEM LL) for a $38.25 debit. The trade has a 52 day life and would provide 10.38% downside protection and a 4.58% assigned return rate for a 32.00% annualized return rate (for comparison purposes only). Agnico Eagle Mines has a current annual dividend yield of 0.26%. [WBA-Seven Summits Research]