Priceline com (PCLN) 11/20/09 PriceWatch Alert Targets 3.61% Downside Protection

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

Priceline com (NasdaqNM: PCLN) closed yesterday at $207.64. So far the stock has hit a 52-week low of $52.84 and 52-week high of $210.40. Priceline com stock has been showing support around 199.94 and resistance in the 212.18 range. Technical indicators for the stock are Bullish and S&P gives PCLN a neutral 3 STAR (out of 5) hold rating. PCLN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 220 covered call (PNE AD) for a net debit in the $200.14 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 3.61% downside protection and a 9.92% assigned return rate for a 63.54% 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 PCLN Jan '11 95 Call (VZJ AS) and selling the Jan '10 220 call (PNE AD) for a $108.90 debit. The trade has a 57 day life and would provide 1.80% downside protection and a 14.78% assigned return rate for a 95.00% annualized return rate (for comparison purposes only). Priceline com does not pay dividends at this time. [FBB-Seven Summits Research]