Occidental Petroleum (OXY) 11/19/09 PriceWatch Alert Could Hit 40.92% Return

Posted: Thursday, November 19, 2009 8:25 AM EDT
By: Market Intelligence Center Staff

Occidental Petroleum (NYSE: OXY) closed yesterday at $83.21. So far the stock has hit a 52-week low of $40.18 and 52-week high of $85.20. Occidental Petroleum stock has been showing support around 81.58 and resistance in the 85.30 range. Technical indicators for the stock are Bullish and S&P gives OXY a positive 4 STAR (out of 5) buy rating. OXY appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 85 covered call (OXY AQ) for a net debit in the $79.81 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 4.09% downside protection and a 6.50% assigned return rate for a 40.92% 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 OXY Jan '11 50 Call (VXY AJ) and selling the Jan '10 85 call (OXY AQ) for a $31.10 debit. The trade has a 58 day life and would provide 2.54% downside protection and a 12.54% assigned return rate for a 79.00% annualized return rate (for comparison purposes only). Occidental Petroleum has a current annual dividend yield of 1.56%. [THA-Seven Summits Research]