CF Industries (CF) 11/6/09 PriceWatch Alert Up To 32.04% Return

Posted: Friday, November 06, 2009 8:36 AM EDT
By: Market Intelligence Center Staff

CF Industries (NYSE: CF) closed yesterday at $79.90. So far the stock has hit a 52-week low of $39.14 and 52-week high of $95.13. CF Industries stock has been showing support around 77.41 and resistance in the 82.61 range. Technical indicators for the stock are Bearish and S&P gives CF a neutral 3 STAR (out of 5) hold rating. CF appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 75 covered call (CF AO) for a net debit in the $70.60 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 11.64% downside protection and a 6.23% assigned return rate for a 32.04% 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 CF Jan '11 40 Call (XCX AH) and selling the Jan '10 75 call (CF AO) for a $31.55 debit. The trade has a 71 day life and would provide 10.45% downside protection and a 10.94% assigned return rate for a 56.00% annualized return rate (for comparison purposes only). CF Industries has a current annual dividend yield of 0.47%. [FBB-Seven Summits Research]