Plum Creek Timber (PCL) 11/9/09 PriceWatch Alert Up To 11.28% Downside Protection

Posted: Monday, November 09, 2009 8:18 AM EDT
By: Market Intelligence Center Staff

Plum Creek Timber (NYSE: PCL) ended the last trading session at $32.81. So far the stock has hit a 52-week low of $22.88 and 52-week high of $37.89. Plum Creek Timber stock has been showing support around 31.64 and resistance in the 33.78 range. Technical indicators for the stock are Bullish and S&P gives PCL a neutral 3 STAR (out of 5) hold rating. PCL appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Feb '10 30 covered call (PCL BF) for a net debit in the $29.11 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 11.28% downside protection and a 3.06% assigned return rate for a 10.83% 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 PCL Jan '11 22.50 Call (ZCP AX) and selling the Feb '10 30 call (PCL BF) for a $7.10 debit. The trade has a 103 day life and would provide 9.78% downside protection and a 5.63% assigned return rate for a 20.00% annualized return rate (for comparison purposes only). Plum Creek Timber has a current annual dividend yield of 5.21%. [ABR-Seven Summits Research]