Plains Exploration and Production (PXP) PriceWatch Alert for November 3, 2009

Posted: Tuesday, November 03, 2009 8:44 AM EDT
By: Market Intelligence Center Staff

Plains Exploration and Production (NYSE: PXP) closed yesterday at $25.96. So far the stock has hit a 52-week low of $15.25 and 52-week high of $32.87. Plains Exploration and Production stock has been showing support around 23.83 and resistance in the 28.73 range. Technical indicators for the stock are Bearish and S&P gives PXP a neutral 3 STAR (out of 5) hold rating. PXP appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 22.50 covered call (PON AX) for a net debit in the $21.46 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 17.33% downside protection and a 4.85% assigned return rate for a 23.90% 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 PXP Jan '11 7.50 Call (ZXL AU) and selling the Jan '10 22.50 call (PON AX) for a $14.25 debit. The trade has a 74 day life and would provide 16.22% downside protection and a 5.26% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Plains Exploration and Production does not pay dividends at this time. [ATU-Seven Summits Research]