Capital One (COF) 11/16/09 PriceWatch Alert Up To 35.18% Return

Posted: Monday, November 16, 2009 8:22 AM EDT
By: Market Intelligence Center Staff

Capital One (NYSE: COF) ended the last trading session at $38.80. 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 37.66 and resistance in the 39.66 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 Mar '10 37 covered call (COF CA) for a net debit in the $33.05 area. That is also the break even stock price for this trade. This covered call has a 124 day duration, provides 14.82% downside protection and an 11.95% assigned return rate for a 35.18% 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 15 Call (OTF AC) and selling the Mar '10 37 call (COF CA) for an $18.90 debit. The trade has a 124 day life and would provide 12.63% downside protection and a 16.40% assigned return rate for a 48.00% annualized return rate (for comparison purposes only). Capital One has a current annual dividend yield of 0.50%. [ABR-Seven Summits Research]