Monsanto (MON) 11/3/09 PriceWatch Alert With 9.30% Downside Protection

Posted: Tuesday, November 03, 2009 8:22 AM EDT
By: Market Intelligence Center Staff

Monsanto (NYSE: MON) closed yesterday at $68.28. So far the stock has hit a 52-week low of $63.47 and 52-week high of $94.95. Monsanto stock has been showing support around 66.39 and resistance in the 69.59 range. Technical indicators for the stock are Bearish and S&P gives MON a neutral 3 STAR (out of 5) hold rating. MON appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 65 covered call (MON AM) for a net debit in the $61.93 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 9.30% downside protection and a 4.96% assigned return rate for a 24.45% 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 MON Jan '11 35 Call (VAB AG) and selling the Jan '10 65 call (MON AM) for a $27.55 debit. The trade has a 74 day life and would provide 8.39% downside protection and an 8.89% assigned return rate for a 44.00% annualized return rate (for comparison purposes only). Monsanto has a current annual dividend yield of 1.52%. [ATU-Seven Summits Research]