Cameron International (CAM) 11/2/09 PriceWatch Alert Could Hit 29.96% Return

Posted: Monday, November 02, 2009 8:23 AM EDT

Cameron International (NYSE: CAM) ended the last trading session at $36.97. So far the stock has hit a 52-week low of $16.15 and 52-week high of $42.39. Cameron International stock has been showing support around 35.43 and resistance in the 39.75 range. Technical indicators for the stock are Bearish and S&P gives CAM a neutral 3 STAR (out of 5) hold rating. CAM appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 35 covered call (CAM AG) for a net debit in the $32.97 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 10.82% downside protection and a 6.16% assigned return rate for a 29.96% 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 CAM Jan '11 7.50 Call (OKA AU) and selling the Jan '10 35 call (CAM AG) for a $26.95 debit. The trade has a 75 day life and would provide 6.82% downside protection and a 2.04% assigned return rate for a 10.00% annualized return rate (for comparison purposes only). Cameron International does not pay dividends at this time. [ABR-Seven Summits Research]

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