Expedia (EXPE) 11/20/09 PriceWatch Alert At $20.59 Break Even

Posted: Friday, November 20, 2009 8:41 AM EDT
By: Market Intelligence Center Staff

Expedia (NasdaqNM: EXPE) closed yesterday at $24.59. So far the stock has hit a 52-week low of $6.00 and 52-week high of $27.37. Expedia stock has been showing support around 23.96 and resistance in the 25.54 range. Technical indicators for the stock are Bullish and S&P gives EXPE a neutral 3 STAR (out of 5) hold rating. EXPE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 22.50 covered call (UED DX) for a net debit in the $20.59 area. That is also the break even stock price for this trade. This covered call has a 148 day duration, provides 16.27% downside protection and a 9.28% assigned return rate for a 22.88% 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 EXPE Jan '11 10 Call (ZPT AB) and selling the Apr '10 22.50 call (UED DX) for an $11.30 debit. The trade has a 148 day life and would provide 13.38% downside protection and a 10.62% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Expedia does not pay dividends at this time. [FBB-Seven Summits Research]