Goldcorp (GG) 11/6/09 PriceWatch Alert With 11.37% Downside Protection

Posted: Friday, November 06, 2009 8:35 AM EDT

Goldcorp (NYSE: GG) closed yesterday at $40.44. So far the stock has hit a 52-week low of $17.05 and 52-week high of $43.41. Goldcorp stock has been showing support around 39.27 and resistance in the 41.21 range. Technical indicators for the stock are Bullish. GG appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 42 covered call (GAG DP) for a net debit in the $35.84 area. That is also the break even stock price for this trade. This covered call has a 162 day duration, provides 11.37% downside protection and a 17.19% assigned return rate for a 38.72% 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 GG Jan '11 25 Call (OPJ AE) and selling the Apr '10 42 call (GAG DP) for a $12.90 debit. The trade has a 162 day life and would provide 6.28% downside protection and a 31.78% assigned return rate for a 72.00% annualized return rate (for comparison purposes only). Goldcorp has a current annual dividend yield of 0.45%. [FBB-Seven Summits Research]

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