Assured Guaranty (AGO) 11/20/09 PriceWatch Alert Up To 25.99% Downside Protection

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

Assured Guaranty (NYSE: AGO) closed yesterday at $25.01. So far the stock has hit a 52-week low of $2.69 and 52-week high of $28.14. Assured Guaranty stock has been showing support around 24.25 and resistance in the 26.17 range. Technical indicators for the stock are Bullish and S&P gives AGO a neutral 3 STAR (out of 5) hold rating. AGO appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 20 covered call (AGO DD) for a net debit in the $18.51 area. That is also the break even stock price for this trade. This covered call has a 148 day duration, provides 25.99% downside protection and an 8.05% assigned return rate for a 19.85% 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 AGO Jan '11 2.50 Call (VVQ AZ) and selling the Apr '10 20 call (AGO DD) for a $16.50 debit. The trade has a 148 day life and would provide 24.03% downside protection and a 6.06% assigned return rate for a 15.00% annualized return rate (for comparison purposes only). Assured Guaranty has a current annual dividend yield of 0.71%. [FBB-Seven Summits Research]