Marathon Oil (MRO) 11/3/09 PriceWatch Alert Targets 26.49% Return

Posted: Tuesday, November 03, 2009 8:14 AM EDT
By: Market Intelligence Center Staff

Marathon Oil (NYSE: MRO) closed yesterday at $31.97. So far the stock has hit a 52-week low of $19.34 and 52-week high of $35.71. Marathon Oil stock has been showing support around 31.04 and resistance in the 32.98 range. Technical indicators for the stock are Bearish and S&P gives MRO a neutral 3 STAR (out of 5) hold rating. MRO appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 31 covered call (MRO AO) for a net debit in the $29.42 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 7.98% downside protection and a 5.37% assigned return rate for a 26.49% 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 MRO Jan '11 17.50 Call (VXM AW) and selling the Jan '10 31 call (MRO AO) for an $11.95 debit. The trade has a 74 day life and would provide 7.88% downside protection and a 12.97% assigned return rate for a 64.00% annualized return rate (for comparison purposes only). Marathon Oil has a current annual dividend yield of 2.87%. [ATU-Seven Summits Research]