Amylin Pharmaceuticals (AMLN) 11/4/09 PriceWatch Alert With 25.39% Downside Protection

Posted: Wednesday, November 04, 2009 8:09 AM EDT

Amylin Pharmaceuticals (NasdaqNM: AMLN) closed yesterday at $12.21. So far the stock has hit a 52-week low of $5.50 and 52-week high of $15.69. Amylin Pharmaceuticals stock has been showing support around 11.32 and resistance in the 12.66 range. Technical indicators for the stock are Bearish and S&P gives AMLN a neutral 3 STAR (out of 5) hold rating. AMLN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 10 covered call (AQM DB) for a net debit in the $9.11 area. That is also the break even stock price for this trade. This covered call has a 164 day duration, provides 25.39% downside protection and a 9.77% assigned return rate for a 21.74% 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 AMLN Jan '11 5 Call (OGA AA) and selling the Apr '10 10 call (AQM DB) for a $4.70 debit. The trade has a 164 day life and would provide 20.56% downside protection and a 6.38% assigned return rate for a 14.00% annualized return rate (for comparison purposes only). Amylin Pharmaceuticals does not pay dividends at this time. [WBA-Seven Summits Research]

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