Massey Energy (MEE) 11/16/09 PriceWatch Alert Targets 13.32% Downside Protection

Posted: Monday, November 16, 2009 8:31 AM EDT
By: Market Intelligence Center Staff

Massey Energy (NYSE: MEE) ended the last trading session at $36.03. So far the stock has hit a 52-week low of $9.62 and 52-week high of $37.13. Massey Energy stock has been showing support around 34.60 and resistance in the 37.42 range. Technical indicators for the stock are Bullish and S&P gives MEE a neutral 3 STAR (out of 5) hold rating. MEE appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 33 covered call (MQO AA) for a net debit in the $31.23 area. That is also the break even stock price for this trade. This covered call has a 61 day duration, provides 13.32% downside protection and a 5.67% assigned return rate for a 33.91% 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 MEE Jan '11 7.50 Call (VHK AU) and selling the Jan '10 33 call (MQO AA) for a $24.00 debit. The trade has a 61 day life and would provide 12.57% downside protection and a 6.25% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Massey Energy has a current annual dividend yield of 0.66%. [ABR-Seven Summits Research]