Kinder Morgan (KMP) 11/6/09 PriceWatch Alert Support Down To $54.46

Posted: Friday, November 06, 2009 8:43 AM EDT

Kinder Morgan (NYSE: KMP) closed yesterday at $55.22. So far the stock has hit a 52-week low of $40.19 and 52-week high of $57.66. Kinder Morgan stock has been showing support around 54.46 and resistance in the 55.60 range. Technical indicators for the stock are Bullish and S&P gives KMP a very positive 5 STAR (out of 5) strong buy rating. KMP appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 55 covered call (KMP AK) for a net debit in the $53.47 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 3.17% downside protection and a 2.86% assigned return rate for a 14.71% 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 KMP Jan '11 45 Call (VAU AI) and selling the Jan '10 55 call (KMP AK) for an $8.50 debit. The trade has a 71 day life and would provide 3.11% downside protection and a 17.65% assigned return rate for a 91.00% annualized return rate (for comparison purposes only). Kinder Morgan has a current annual dividend yield of 7.81%. [FBB-Seven Summits Research]

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