CSX (CSX) 11/6/09 PriceWatch Alert Targets 5.44% Downside Protection

Posted: Friday, November 06, 2009 8:46 AM EDT
By: Market Intelligence Center Staff

CSX (NYSE: CSX) closed yesterday at $46.89. So far the stock has hit a 52-week low of $20.70 and 52-week high of $48.85. CSX stock has been showing support around 45.20 and resistance in the 47.82 range. Technical indicators for the stock are Bullish and S&P gives CSX a positive 4 STAR (out of 5) buy rating. CSX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 48 covered call (CDT AU) for a net debit in the $44.34 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 5.44% downside protection and an 8.25% assigned return rate for a 42.43% 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 CSX Jan '11 22.50 Call (OBC AX) and selling the Jan '10 48 call (CDT AU) for a $21.90 debit. The trade has a 71 day life and would provide 5.31% downside protection and a 16.44% assigned return rate for an 85.00% annualized return rate (for comparison purposes only). CSX has a current annual dividend yield of 1.91%. [FBB-Seven Summits Research]