Alpha Natural Resources (ANR) 11/3/09 PriceWatch Alert Targets 12.54% Downside Protection

Posted: Tuesday, November 03, 2009 8:20 AM EDT
By: Market Intelligence Center Staff

Alpha Natural Resources (NYSE: ANR) closed yesterday at $34.29. So far the stock has hit a 52-week low of $13.93 and 52-week high of $42.20. Alpha Natural Resources stock has been showing support around 32.36 and resistance in the 36.02 range. Technical indicators for the stock are Bearish and S&P gives ANR a neutral 3 STAR (out of 5) hold rating. ANR appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 32 covered call (HHW AO) for a net debit in the $29.99 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 12.54% downside protection and a 6.70% assigned return rate for a 33.06% 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 ANR Jan '11 5 Call (VJV AA) and selling the Jan '10 32 call (HHW AO) for a $24.75 debit. The trade has a 74 day life and would provide 13.24% downside protection and a 9.09% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). Alpha Natural Resources does not pay dividends at this time. [ATU-Seven Summits Research]