Massey Energy (MEE) 11/3/09 PriceWatch Alert At $24.06 Break Even

Posted: Tuesday, November 03, 2009 8:05 AM EDT
By: Market Intelligence Center Staff

Massey Energy (NYSE: MEE) closed yesterday at $29.36. 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 27.72 and resistance in the 30.94 range. Technical indicators for the stock are Bearish 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 an Apr '10 27 covered call (MEE DT) for a net debit in the $24.06 area. That is also the break even stock price for this trade. This covered call has a 165 day duration, provides 18.05% downside protection and a 12.22% assigned return rate for a 27.03% 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 7.50 Call (VHK AU) and selling the Apr '10 27 call (MEE DT) for a $17.35 debit. The trade has a 165 day life and would provide 15.36% downside protection and a 12.39% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Massey Energy has a current annual dividend yield of 0.79%. [ATU-Seven Summits Research]