OSI Pharmaceuticals (OSIP) 11/6/09 PriceWatch Alert With 13.58% Downside Protection

Posted: Friday, November 06, 2009 8:23 AM EDT

OSI Pharmaceuticals (NasdaqNM: OSIP) closed yesterday at $33.14. So far the stock has hit a 52-week low of $27.01 and 52-week high of $43.00. OSI Pharmaceuticals stock has been showing support around 31.74 and resistance in the 33.92 range. Technical indicators for the stock are Bullish and S&P gives OSIP a neutral 3 STAR (out of 5) hold rating. OSIP appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at an Apr '10 30 covered call (GHU DF) for a net debit in the $28.64 area. That is also the break even stock price for this trade. This covered call has a 162 day duration, provides 13.58% downside protection and a 4.75% assigned return rate for a 10.70% 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 OSIP Jan '11 12.50 Call (OIG AV) and selling the Apr '10 30 call (GHU DF) for a $16.75 debit. The trade has a 162 day life and would provide 11.74% downside protection and a 4.48% assigned return rate for a 10.00% annualized return rate (for comparison purposes only). OSI Pharmaceuticals does not pay dividends at this time. [FBB-Seven Summits Research]

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