Constellation Energy Group (CEG) PriceWatch Alert for November 20, 2009

Posted: Friday, November 20, 2009 8:37 AM EDT
By: Market Intelligence Center Staff

Constellation Energy Group (NYSE: CEG) closed yesterday at $31.22. So far the stock has hit a 52-week low of $15.05 and 52-week high of $33.87. Constellation Energy stock has been showing support around 30.70 and resistance in the 31.82 range. Technical indicators for the stock are Bearish and S&P gives CEG a neutral 3 STAR (out of 5) hold rating. CEG appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 30 covered call (CEY DF) for a net debit in the $28.47 area. That is also the break even stock price for this trade. This covered call has a 148 day duration, provides 8.81% downside protection and a 5.37% assigned return rate for a 13.25% 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 CEG Jan '11 25 Call (ZLJ AE) and selling the Apr '10 30 call (CEY DF) for a $4.55 debit. The trade has a 148 day life and would provide 5.35% downside protection and a 9.89% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). Constellation Energy has a current annual dividend yield of 2.99%. [FBB-Seven Summits Research]