Flowserve (FLS) 11/6/09 PriceWatch Alert Up To 45.80% Return

Posted: Friday, November 06, 2009 8:47 AM EDT
By: Market Intelligence Center Staff

Flowserve (NYSE: FLS) closed yesterday at $102.41. So far the stock has hit a 52-week low of $37.18 and 52-week high of $108.85. Flowserve stock has been showing support around 98.40 and resistance in the 104.52 range. Technical indicators for the stock are Bullish and S&P gives FLS a very positive 5 STAR (out of 5) strong buy rating. FLS appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 105 covered call (FLS AA) for a net debit in the $96.41 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 5.86% downside protection and an 8.91% assigned return rate for a 45.80% 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 FLS Jan '11 50 Call (ZPS AU) and selling the Jan '10 105 call (FLS AA) for a $47.75 debit. The trade has a 71 day life and would provide 4.55% downside protection and a 15.18% assigned return rate for a 78.00% annualized return rate (for comparison purposes only). Flowserve has a current annual dividend yield of 1.09%. [FBB-Seven Summits Research]