US Steel (X) 11/3/09 PriceWatch Alert Down To $28.73 Break Even

Posted: Tuesday, November 03, 2009 8:39 AM EDT

US Steel (NYSE: X) closed yesterday at $34.48. So far the stock has hit a 52-week low of $16.66 and 52-week high of $51.65. US Steel stock has been showing support around 31.96 and resistance in the 37.06 range. Technical indicators for the stock are Bearish and S&P gives X a positive 4 STAR (out of 5) buy rating. X appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 33 covered call (FBJ DA) for a net debit in the $28.73 area. That is also the break even stock price for this trade. This covered call has a 165 day duration, provides 16.68% downside protection and a 14.86% assigned return rate for a 32.88% 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 X Jan '11 17.50 Call (OUS AW) and selling the Apr '10 33 call (FBJ DA) for a $12.55 debit. The trade has a 165 day life and would provide 12.85% downside protection and a 23.51% assigned return rate for a 52.00% annualized return rate (for comparison purposes only). US Steel has a current annual dividend yield of 0.54%. [ATU-Seven Summits Research]

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