XTO Energy (XTO) 11/6/09 PriceWatch Alert Targets 6.83% Downside Protection

Posted: Friday, November 06, 2009 8:45 AM EDT
By: Market Intelligence Center Staff

XTO Energy (NYSE: XTO) closed yesterday at $43.18. So far the stock has hit a 52-week low of $26.35 and 52-week high of $46.49. XTO Energy stock has been showing support around 41.16 and resistance in the 44.24 range. Technical indicators for the stock are Bullish and S&P gives XTO a positive 4 STAR (out of 5) buy rating. XTO appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 43 covered call (XJV AQ) for a net debit in the $40.23 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 6.83% downside protection and a 6.89% assigned return rate for a 35.40% 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 XTO Jan '11 22.50 Call (OUO AX) and selling the Jan '10 43 call (XJV AQ) for an $18.05 debit. The trade has a 71 day life and would provide 6.09% downside protection and a 13.57% assigned return rate for a 70.00% annualized return rate (for comparison purposes only). XTO Energy has a current annual dividend yield of 1.18%. [FBB-Seven Summits Research]