Allergan (AGN) PriceWatch Alert for November 6, 2009

Posted: Friday, November 06, 2009 8:29 AM EDT
By: Market Intelligence Center Staff

Allergan (NYSE: AGN) closed yesterday at $59.16. So far the stock has hit a 52-week low of $28.95 and 52-week high of $59.37. Allergan stock has been showing support around 56.93 and resistance in the 60.49 range. Technical indicators for the stock are Bullish and S&P gives AGN a neutral 3 STAR (out of 5) hold rating. AGN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 55 covered call (AGN AK) for a net debit in the $53.46 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 9.63% downside protection and a 2.88% assigned return rate for a 14.81% 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 AGN Jan '11 22.50 Call (OBO AX) and selling the Jan '10 55 call (AGN AK) for a $31.25 debit. The trade has a 71 day life and would provide 9.14% downside protection and a 4.00% assigned return rate for a 21.00% annualized return rate (for comparison purposes only). Allergan has a current annual dividend yield of 0.35%. [FBB-Seven Summits Research]