AES (AES) 11/6/09 PriceWatch Alert Support At Around $13.28

Posted: Friday, November 06, 2009 8:13 AM EDT

AES (NYSE: AES) closed yesterday at $13.86. So far the stock has hit a 52-week low of $4.80 and 52-week high of $15.44. AES stock has been showing support around 13.28 and resistance in the 14.16 range. Technical indicators for the stock are Bearish and S&P gives AES a positive 4 STAR (out of 5) buy rating. AES appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a May '10 12.50 covered call (AES EV) for a net debit in the $11.46 area. That is also the break even stock price for this trade. This covered call has a 197 day duration, provides 17.32% downside protection and a 9.08% assigned return rate for a 16.81% 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 AES Jan '11 5 Call (VNU AA) and selling the May '10 12.50 call (AES EV) for a $6.65 debit. The trade has a 197 day life and would provide 15.95% downside protection and a 12.78% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). AES does not pay dividends at this time. [FBB-Seven Summits Research]

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