Devon Energy (DVN) 11/3/09 PriceWatch Alert Targets 11.70% Downside Protection

Posted: Tuesday, November 03, 2009 8:46 AM EDT
By: Market Intelligence Center Staff

Devon Energy (NYSE: DVN) closed yesterday at $64.98. So far the stock has hit a 52-week low of $38.55 and 52-week high of $83.77. Devon Energy stock has been showing support around 62.69 and resistance in the 67.51 range. Technical indicators for the stock are Bearish and S&P gives DVN a positive 4 STAR (out of 5) buy rating. DVN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 60 covered call (DVN AL) for a net debit in the $57.38 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 11.70% downside protection and a 4.57% assigned return rate for a 22.52% 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 DVN Jan '11 25 Call (VVH AE) and selling the Jan '10 60 call (DVN AL) for a $32.80 debit. The trade has a 74 day life and would provide 11.05% downside protection and a 6.71% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). Devon Energy has a current annual dividend yield of 0.94%. [ATU-Seven Summits Research]