International Paper (IP) 11/6/09 PriceWatch Alert With $20.14 Break Even

Posted: Friday, November 06, 2009 8:29 AM EDT
By: Market Intelligence Center Staff

International Paper (NYSE: IP) closed yesterday at $23.84. So far the stock has hit a 52-week low of $3.93 and 52-week high of $25.40. International Paper stock has been showing support around 22.76 and resistance in the 24.54 range. Technical indicators for the stock are Bullish and S&P gives IP a positive 4 STAR (out of 5) buy rating. IP appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 21 covered call (IUI AU) for a net debit in the $20.14 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 15.52% downside protection and a 4.27% assigned return rate for a 21.95% 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 IP Jan '11 7.50 Call (VNP AU) and selling the Jan '10 21 call (IUI AU) for a $12.80 debit. The trade has a 71 day life and would provide 14.85% downside protection and a 5.47% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). International Paper has a current annual dividend yield of 0.43%. [FBB-Seven Summits Research]