Baidu.com (BIDU) 11/20/09 PriceWatch Alert Support Down To $418.95

Posted: Friday, November 20, 2009 8:44 AM EDT
By: Market Intelligence Center Staff

Baidu.com (NasdaqNM: BIDU) closed yesterday at $428.01. So far the stock has hit a 52-week low of $100.50 and 52-week high of $442.86. Baidu.com stock has been showing support around 418.95 and resistance in the 436.47 range. Technical indicators for the stock are Bullish and S&P gives BIDU a weak 2 STAR (out of 5) sell rating. BIDU appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 420 covered call (BPJ AD) for a net debit in the $396.91 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 7.27% downside protection and a 5.82% assigned return rate for a 37.25% 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 BIDU Jan '11 105 Call (ZUC AA) and selling the Jan '10 420 call (BPJ AD) for a $294.70 debit. The trade has a 57 day life and would provide 6.61% downside protection and a 6.89% assigned return rate for a 44.00% annualized return rate (for comparison purposes only). Baidu.com does not pay dividends at this time. [FBB-Seven Summits Research]