Smith International (SII) 11/3/09 PriceWatch Alert At $23.36 Break Even

Posted: Tuesday, November 03, 2009 8:47 AM EDT

Smith International (NYSE: SII) closed yesterday at $27.96. So far the stock has hit a 52-week low of $18.23 and 52-week high of $35.87. Smith International stock has been showing support around 26.50 and resistance in the 29.34 range. Technical indicators for the stock are Bearish and S&P gives SII a weak 2 STAR (out of 5) sell rating. SII appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 26 covered call (SII DN) for a net debit in the $23.36 area. That is also the break even stock price for this trade. This covered call has a 165 day duration, provides 16.45% downside protection and an 11.30% assigned return rate for a 25.00% 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 SII Jan '11 15 Call (VID AC) and selling the Apr '10 26 call (SII DN) for a $10.00 debit. The trade has a 165 day life and would provide 10.59% downside protection and a 10.00% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). Smith International has a current annual dividend yield of 1.65%. [ATU-Seven Summits Research]

Click Symbol For More News On: (SII)