Massey Energy (MEE) 11/6/09 PriceWatch Alert Could Hit 29.47% Return

Posted: Friday, November 06, 2009 8:24 AM EDT
By: Market Intelligence Center Staff

Massey Energy (NYSE: MEE) closed yesterday at $32.83. So far the stock has hit a 52-week low of $9.62 and 52-week high of $34.63. Massey Energy stock has been showing support around 31.14 and resistance in the 33.76 range. Technical indicators for the stock are Bullish and S&P gives MEE a neutral 3 STAR (out of 5) hold rating. MEE appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 30 covered call (MEE DF) for a net debit in the $26.53 area. That is also the break even stock price for this trade. This covered call has a 162 day duration, provides 19.19% downside protection and a 13.08% assigned return rate for a 29.47% 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 MEE Jan '11 10 Call (VHK AB) and selling the Apr '10 30 call (MEE DF) for a $16.75 debit. The trade has a 162 day life and would provide 18.52% downside protection and a 19.40% assigned return rate for a 44.00% annualized return rate (for comparison purposes only). Massey Energy has a current annual dividend yield of 0.79%. [FBB-Seven Summits Research]