Agrium (AGU) 11/6/09 PriceWatch Alert Targets 13.25% Downside Protection

Posted: Friday, November 06, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

Agrium (NYSE: AGU) closed yesterday at $49.81. So far the stock has hit a 52-week low of $22.08 and 52-week high of $57.63. Agrium stock has been showing support around 47.97 and resistance in the 51.37 range. Technical indicators for the stock are Bearish. AGU appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 45 covered call (AGU AI) for a net debit in the $43.21 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 13.25% downside protection and a 4.14% assigned return rate for a 21.30% 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 AGU Jan '11 10 Call (VAV AB) and selling the Jan '10 45 call (AGU AI) for a $33.55 debit. The trade has a 71 day life and would provide 12.57% downside protection and a 4.32% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). Agrium has a current annual dividend yield of 0.23%. [FBB-Seven Summits Research]