Potash (POT) 11/19/09 PriceWatch Alert Down To $103.89 Break Even

Posted: Thursday, November 19, 2009 8:02 AM EDT
By: Market Intelligence Center Staff

Potash (NYSE: POT) closed yesterday at $113.79. So far the stock has hit a 52-week low of $47.54 and 52-week high of $121.36. Potash stock has been showing support around 110.44 and resistance in the 117.20 range. Technical indicators for the stock are Bullish and S&P gives POT a positive 4 STAR (out of 5) buy rating. POT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 110 covered call (PYP AB) for a net debit in the $103.89 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 8.70% downside protection and a 5.88% assigned return rate for a 37.01% 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 POT Jan '11 50 Call (VPT AJ) and selling the Jan '10 110 call (PYP AB) for a $54.80 debit. The trade has a 58 day life and would provide 7.90% downside protection and a 9.49% assigned return rate for a 60.00% annualized return rate (for comparison purposes only). Potash has a current annual dividend yield of 0.38%. [THA-Seven Summits Research]