Plains Exploration and Production (PXP) 11/6/09 PriceWatch Alert Targets 24.12% Return

Posted: Friday, November 06, 2009 8:34 AM EDT

Plains Exploration and Production (NYSE: PXP) closed yesterday at $27.52. So far the stock has hit a 52-week low of $15.25 and 52-week high of $32.87. Plains Exploration and Production stock has been showing support around 26.05 and resistance in the 28.29 range. Technical indicators for the stock are Bearish and S&P gives PXP a neutral 3 STAR (out of 5) hold rating. PXP appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 25 covered call (PON EI) for a net debit in the $22.12 area. That is also the break even stock price for this trade. This covered call has a 197 day duration, provides 19.62% downside protection and a 13.02% assigned return rate for a 24.12% 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 PXP Jan '11 15 Call (ZXL AC) and selling the May '10 25 call (PON EI) for an $8.45 debit. The trade has a 197 day life and would provide 14.79% downside protection and an 18.34% assigned return rate for a 34.00% annualized return rate (for comparison purposes only). Plains Exploration and Production does not pay dividends at this time. [FBB-Seven Summits Research]

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