Petroleo Brasileiro (PBR) PriceWatch Alert for November 3, 2009

Posted: Tuesday, November 03, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

Petroleo Brasileiro (NYSE: PBR) closed yesterday at $46.71. So far the stock has hit a 52-week low of $14.73 and 52-week high of $51.67. Petroleo Brasileiro stock has been showing support around 44.70 and resistance in the 49.44 range. Technical indicators for the stock are Bullish and S&P gives PBR a neutral 3 STAR (out of 5) hold rating. PBR appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at an Apr '10 49 covered call (PMJ DU) for a net debit in the $42.46 area. That is also the break even stock price for this trade. This covered call has a 165 day duration, provides 9.10% downside protection and a 15.40% assigned return rate for a 34.07% 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 PBR Jan '11 30 Call (VDW AF) and selling the Apr '10 49 call (PMJ DU) for a $13.95 debit. The trade has a 165 day life and would provide 5.91% downside protection and a 36.20% assigned return rate for an 80.00% annualized return rate (for comparison purposes only). Petroleo Brasileiro has a current annual dividend yield of 0.73%. [ATU-Seven Summits Research]