PACCAR (PCAR) 11/2/09 PriceWatch Alert Down To $34.41 Break Even

Posted: Monday, November 02, 2009 8:12 AM EDT

PACCAR (NasdaqNM: PCAR) ended the last trading session at $37.41. So far the stock has hit a 52-week low of $20.38 and 52-week high of $40.26. PACCAR stock has been showing support around 35.56 and resistance in the 39.42 range. Technical indicators for the stock are Bearish and S&P gives PCAR a neutral 3 STAR (out of 5) hold rating. PCAR appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Feb '10 38 covered call (PAQ BU) for a net debit in the $34.41 area. That is also the break even stock price for this trade. This covered call has an 110 day duration, provides 8.02% downside protection and a 10.43% assigned return rate for a 34.62% 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 PCAR Jan '11 20 Call (OKG AD) and selling the Feb '10 38 call (PAQ BU) for a $15.40 debit. The trade has an 110 day life and would provide 5.37% downside protection and a 16.88% assigned return rate for a 56.00% annualized return rate (for comparison purposes only). PACCAR has a current annual dividend yield of 0.97%. [ABR-Seven Summits Research]

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