Bucyrus International (BUCY) 11/20/09 PriceWatch Alert Up To 11.02% Downside Protection

Posted: Friday, November 20, 2009 8:35 AM EDT
By: Market Intelligence Center Staff

Bucyrus International (NasdaqNM: BUCY) closed yesterday at $52.61. So far the stock has hit a 52-week low of $10.62 and 52-week high of $55.45. Bucyrus International stock has been showing support around 51.06 and resistance in the 53.82 range. Technical indicators for the stock are Bullish and S&P gives BUCY a very positive 5 STAR (out of 5) strong buy rating. BUCY appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 50 covered call (HIK AJ) for a net debit in the $46.81 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 11.02% downside protection and a 6.81% assigned return rate for a 43.64% 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 BUCY Jan '11 10 Call (XQX AB) and selling the Jan '10 50 call (HIK AJ) for a $36.95 debit. The trade has a 57 day life and would provide 10.76% downside protection and an 8.25% assigned return rate for a 53.00% annualized return rate (for comparison purposes only). Bucyrus International has a current annual dividend yield of 0.18%. [FBB-Seven Summits Research]