Hess (HES) 10/29/09 PriceWatch Alert With 11.33% Downside Protection

Posted: Thursday, October 29, 2009 8:46 AM EDT
By: Market Intelligence Center Staff

Hess (NYSE: HES) closed yesterday at $54.72. So far the stock has hit a 52-week low of $35.50 and 52-week high of $69.74. Hess stock has been showing support around 51.70 and resistance in the 60.14 range. Technical indicators for the stock are Bullish and S&P gives HES a positive 4 STAR (out of 5) buy rating. HES appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Dec '09 50 covered call (IGG LJ) for a net debit in the $48.52 area. That is also the break even stock price for this trade. This covered call has a 51 day duration, provides 11.33% downside protection and a 3.05% assigned return rate for a 21.83% 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 HES Jan '11 25 Call (VHS AE) and selling the Dec '09 50 call (IGG LJ) for a $24.50 debit. The trade has a 51 day life and would provide 9.54% downside protection and a 2.04% assigned return rate for a 15.00% annualized return rate (for comparison purposes only). Hess has a current annual dividend yield of 0.70%. [THA-Seven Summits Research]