Foster Wheeler (FWLT) 11/6/09 PriceWatch Alert At $26.50 Break Even

Posted: Friday, November 06, 2009 8:35 AM EDT
By: Market Intelligence Center Staff

Foster Wheeler (NasdaqNM: FWLT) closed yesterday at $31.50. So far the stock has hit a 52-week low of $12.73 and 52-week high of $35.82. Foster Wheeler stock has been showing support around 29.82 and resistance in the 32.58 range. Technical indicators for the stock are Bullish and S&P gives FWLT a positive 4 STAR (out of 5) buy rating. FWLT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 31 covered call (UQI EE) for a net debit in the $26.50 area. That is also the break even stock price for this trade. This covered call has a 197 day duration, provides 15.87% downside protection and a 16.98% assigned return rate for a 31.46% 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 FWLT Jan '11 15 Call (ZHF AC) and selling the May '10 31 call (UQI EE) for a $12.55 debit. The trade has a 197 day life and would provide 12.54% downside protection and a 27.49% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Foster Wheeler does not pay dividends at this time. [FBB-Seven Summits Research]