Noble (NE) 11/6/09 PriceWatch Alert Targets 7.02% Downside Protection

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

Noble (NYSE: NE) closed yesterday at $42.72. So far the stock has hit a 52-week low of $19.23 and 52-week high of $45.09. Noble stock has been showing support around 41.79 and resistance in the 43.57 range. Technical indicators for the stock are Bullish and S&P gives NE a very positive 5 STAR (out of 5) strong buy rating. NE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 43 covered call (NE AX) for a net debit in the $39.72 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 7.02% downside protection and an 8.26% assigned return rate for a 42.45% 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 NE Jan '11 15 Call (VJB AC) and selling the Jan '10 43 call (NE AX) for a $25.40 debit. The trade has a 71 day life and would provide 5.43% downside protection and a 10.24% assigned return rate for a 53.00% annualized return rate (for comparison purposes only). Noble has a current annual dividend yield of 0.89%. [FBB-Seven Summits Research]