Massey Energy (MEE) 10/30/09 PriceWatch Alert Could Hit 28.69% Return

Posted: Friday, October 30, 2009 8:42 AM EDT
By: Market Intelligence Center Staff

Massey Energy (NYSE: MEE) closed yesterday at $30.54. So far the stock has hit a 52-week low of $9.62 and 52-week high of $34.63. Massey Energy stock has been showing support around 28.87 and resistance in the 31.79 range. Technical indicators for the stock are Bullish and S&P gives MEE a neutral 3 STAR (out of 5) hold rating. MEE appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 27 covered call (MEE AT) for a net debit in the $25.44 area. That is also the break even stock price for this trade. This covered call has a 78 day duration, provides 16.70% downside protection and a 6.13% assigned return rate for a 28.69% 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 MEE Jan '11 5 Call (VHK AA) and selling the Jan '10 27 call (MEE AT) for a $20.75 debit. The trade has a 78 day life and would provide 15.68% downside protection and a 6.02% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Massey Energy has a current annual dividend yield of 0.77%. [FBB-Seven Summits Research]