Southern Co (SO) Fell Over 1% On Friday And Stock Is Trading With Bearish Technicals

Posted: Monday, November 02, 2009 8:30 AM EDT
By: Market Intelligence Center Staff

Southern Co (NYSE: SO) ended the last trading session at $31.19. So far the stock has hit a 52-week low of $26.48 and 52-week high of $37.62. Southern Co stock has been showing support around 30.76 and resistance in the 31.92 range. Technical indicators for the stock are Bearish and S&P gives SO a neutral 3 STAR (out of 5) hold rating. SO appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 31 covered call (SO AS) for a net debit in the $29.89 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 4.17% downside protection and a 3.71% assigned return rate for an 18.07% 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 SO Jan '11 22.50 Call (OBA AX) and selling the Jan '10 31 call (SO AS) for an $8.10 debit. The trade has a 75 day life and would provide 1.89% downside protection and a 4.94% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). Southern Co has a current annual dividend yield of 5.38%. [ABR-Seven Summits Research]