Capital One (COF) 10/29/09 PriceWatch Alert Bullish Price Movement

Posted: Thursday, October 29, 2009 8:15 AM EDT
By: Market Intelligence Center Staff

Capital One (NYSE: COF) closed yesterday at $37.39. So far the stock has hit a 52-week low of $7.80 and 52-week high of $42.99. Capital One stock has been showing support around 35.78 and resistance in the 40.54 range. Technical indicators for the stock are Bullish and S&P gives COF a positive 4 STAR (out of 5) buy rating. COF appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 35 covered call (COF AG) for a net debit in the $32.49 area. That is also the break even stock price for this trade. This covered call has a 79 day duration, provides 13.11% downside protection and a 7.73% assigned return rate for a 35.69% 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 COF Jan '11 10 Call (OTF AB) and selling the Jan '10 35 call (COF AG) for a $23.15 debit. The trade has a 79 day life and would provide 11.34% downside protection and a 7.99% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Capital One has a current annual dividend yield of 0.51%. [THA-Seven Summits Research]