Southern Copper (PCU) 11/6/09 PriceWatch Alert Up To 20.49% Return

Posted: Friday, November 06, 2009 8:02 AM EDT
By: Market Intelligence Center Staff

Southern Copper (NYSE: PCU) closed yesterday at $33.95. So far the stock has hit a 52-week low of $9.12 and 52-week high of $36.39. Southern Copper stock has been showing support around 32.86 and resistance in the 34.56 range. Technical indicators for the stock are Bullish. PCU appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 30 covered call (PCU AF) for a net debit in the $28.85 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 15.02% downside protection and a 3.99% assigned return rate for a 20.49% 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 PCU Jan '11 12.50 Call (XBW AV) and selling the Jan '10 30 call (PCU AF) for a $16.35 debit. The trade has a 71 day life and would provide 15.02% downside protection and a 7.03% assigned return rate for a 36.00% annualized return rate (for comparison purposes only). Southern Copper has a current annual dividend yield of 2.20%. [FBB-Seven Summits Research]