Chevron (CVX) 11/20/09 PriceWatch Alert Up To 2.34% Downside Protection

Posted: Friday, November 20, 2009 8:24 AM EDT
By: Market Intelligence Center Staff

Chevron (NYSE: CVX) closed yesterday at $77.34. So far the stock has hit a 52-week low of $56.12 and 52-week high of $81.92. Chevron stock has been showing support around 75.91 and resistance in the 79.39 range. Technical indicators for the stock are Bullish and S&P gives CVX a very positive 5 STAR (out of 5) strong buy rating. CVX appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 80 covered call (CVX AP) for a net debit in the $75.53 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 2.34% downside protection and a 5.92% assigned return rate for a 37.90% 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 CVX Jan '11 50 Call (VCH AJ) and selling the Jan '10 80 call (CVX AP) for a $25.74 debit. The trade has a 57 day life and would provide 2.07% downside protection and a 16.55% assigned return rate for a 106.00% annualized return rate (for comparison purposes only). Chevron has a current annual dividend yield of 3.45%. [FBB-Seven Summits Research]