Capital One (COF) 11/9/09 PriceWatch Alert Up To 15.40% Downside Protection

Posted: Monday, November 09, 2009 8:12 AM EDT
By: Market Intelligence Center Staff

Capital One (NYSE: COF) ended the last trading session at $37.67. So far the stock has hit a 52-week low of $7.80 and 52-week high of $42.90. Capital One stock has been showing support around 36.34 and resistance in the 38.80 range. Technical indicators for the stock are Bullish and S&P gives COF a positive 4 STAR (out of 5) buy rating. COF appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 34 covered call (COF AO) for a net debit in the $31.87 area. That is also the break even stock price for this trade. This covered call has a 68 day duration, provides 15.40% downside protection and a 6.68% assigned return rate for a 35.87% 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 COF Jan '11 10 Call (OTF AB) and selling the Jan '10 34 call (COF AO) for a $22.30 debit. The trade has a 68 day life and would provide 14.26% downside protection and a 7.62% assigned return rate for a 41.00% annualized return rate (for comparison purposes only). Capital One has a current annual dividend yield of 0.54%. [ABR-Seven Summits Research]