Alcon (ACL) 11/18/09 PriceWatch Alert Targets 46.10% Return

Posted: Wednesday, November 18, 2009 8:24 AM EDT

Alcon (NYSE: ACL) closed yesterday at $147.00. So far the stock has hit a 52-week low of $66.64 and 52-week high of $148.93. Alcon stock has been showing support around 143.96 and resistance in the 148.60 range. Technical indicators for the stock are Bullish and S&P gives ACL a positive 4 STAR (out of 5) buy rating. ACL appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 155 covered call (ACL AK) for a net debit in the $144.25 area. That is also the break even stock price for this trade. This covered call has a 59 day duration, provides 1.87% downside protection and a 7.45% assigned return rate for a 46.10% 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 ACL Jan '11 130 Call (OCL AF) and selling the Jan '10 155 call (ACL AK) for a $23.55 debit. The trade has a 59 day life and would provide no downside protection and a 6.16% assigned return rate for a 38.00% annualized return rate (for comparison purposes only). Alcon has a current annual dividend yield of 2.49%. [WBA-Seven Summits Research]

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