Du Pont (DD) Trading With High Volume And Bullish Technicals

Posted: Tuesday, November 10, 2009 9:25 AM EDT
By: Market Intelligence Center Staff

Du Pont (NYSE: DD) closed yesterday at $34.61. So far the stock has hit a 52-week low of $16.05 and 52-week high of $34.90. Du Pont stock has been showing support around 33.18 and resistance in the 35.36 range. Technical indicators for the stock are Bullish and S&P gives DD a weak 2 STAR (out of 5) sell rating. DD appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 34 covered call (DXT AK) for a net debit in the $32.56 area. That is also the break even stock price for this trade. This covered call has a 67 day duration, provides 5.92% downside protection and a 4.42% assigned return rate for a 24.09% 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 DD Jan '11 25 Call (VDD AE) and selling the Jan '10 34 call (DXT AK) for a $7.85 debit. The trade has a 67 day life and would provide 5.09% downside protection and a 14.65% assigned return rate for an 80.00% annualized return rate (for comparison purposes only). Du Pont has a current annual dividend yield of 4.91%. [ATU-Seven Summits Research]