Agnico Eagle Mines (AEM) 11/20/09 PriceWatch Alert Could Hit 45.62% Return

Posted: Friday, November 20, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

Agnico Eagle Mines (NYSE: AEM) closed yesterday at $61.71. So far the stock has hit a 52-week low of $24.90 and 52-week high of $74.00. Agnico Eagle Mines stock has been showing support around 58.26 and resistance in the 63.56 range. Technical indicators for the stock are Neutral. AEM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 60 covered call (AEM AL) for a net debit in the $56.01 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 9.24% downside protection and a 7.12% assigned return rate for a 45.62% 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 AEM Jan '11 25 Call (ZZJ AE) and selling the Jan '10 60 call (AEM AL) for a $31.40 debit. The trade has a 57 day life and would provide 8.60% downside protection and an 11.46% assigned return rate for a 73.00% annualized return rate (for comparison purposes only). Agnico Eagle Mines has a current annual dividend yield of 0.29%. [FBB-Seven Summits Research]