Transocean (RIG) 11/6/09 PriceWatch Alert At $81.73 Break Even

Posted: Friday, November 06, 2009 8:42 AM EDT
By: Market Intelligence Center Staff

Transocean (NYSE: RIG) closed yesterday at $85.83. So far the stock has hit a 52-week low of $41.95 and 52-week high of $94.44. Transocean stock has been showing support around 83.73 and resistance in the 87.29 range. Technical indicators for the stock are Bullish and S&P gives RIG a very positive 5 STAR (out of 5) strong buy rating. RIG appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 90 covered call (RIG AR) for a net debit in the $81.73 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 4.78% downside protection and a 10.12% assigned return rate for a 52.02% 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 RIG Jan '11 40 Call (VOI AH) and selling the Jan '10 90 call (RIG AR) for a $43.00 debit. The trade has a 71 day life and would provide 3.30% downside protection and a 16.28% assigned return rate for an 84.00% annualized return rate (for comparison purposes only). Transocean does not pay dividends at this time. [FBB-Seven Summits Research]