Sunoco (SUN) 11/18/09 PriceWatch Alert At $23.08 Break Even

Posted: Wednesday, November 18, 2009 8:12 AM EDT
By: Market Intelligence Center Staff

Sunoco (NYSE: SUN) closed yesterday at $26.28. So far the stock has hit a 52-week low of $21.45 and 52-week high of $47.40. Sunoco stock has been showing support around 25.66 and resistance in the 26.84 range. Technical indicators for the stock are Bearish and S&P gives SUN a neutral 3 STAR (out of 5) hold rating. SUN appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a May '10 26 covered call (SUN EL) for a net debit in the $23.08 area. That is also the break even stock price for this trade. This covered call has an 185 day duration, provides 12.18% downside protection and a 12.65% assigned return rate for a 24.96% 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 SUN Jan '11 17.50 Call (VUN AW) and selling the May '10 26 call (SUN EL) for a $6.75 debit. The trade has an 185 day life and would provide 7.72% downside protection and a 25.93% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Sunoco has a current annual dividend yield of 4.50%. [WBA-Seven Summits Research]