MGM Mirage (MGM) 11/20/09 PriceWatch Alert At $7.08 Break Even

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

MGM Mirage (NYSE: MGM) closed yesterday at $11.23. So far the stock has hit a 52-week low of $1.81 and 52-week high of $16.89. MGM Mirage stock has been showing support around 10.40 and resistance in the 12.14 range. Technical indicators for the stock are Bullish and S&P gives MGM a neutral 3 STAR (out of 5) hold rating. MGM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 8 covered call (MGM FK) for a net debit in the $7.08 area. That is also the break even stock price for this trade. This covered call has a 211 day duration, provides 36.95% downside protection and a 12.99% assigned return rate for a 22.48% 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 MGM Jan '11 2.50 Call (VYG AZ) and selling the Jun '10 8 call (MGM FK) for a $4.85 debit. The trade has a 211 day life and would provide 34.55% downside protection and a 13.40% assigned return rate for a 23.00% annualized return rate (for comparison purposes only). MGM Mirage does not pay dividends at this time. [FBB-Seven Summits Research]