PACCAR (PCAR) 11/20/09 PriceWatch Alert With $36.77 Break Even

Posted: Friday, November 20, 2009 8:42 AM EDT
By: Market Intelligence Center Staff

PACCAR (NasdaqNM: PCAR) closed yesterday at $38.87. So far the stock has hit a 52-week low of $20.38 and 52-week high of $40.26. PACCAR stock has been showing support around 38.04 and resistance in the 39.72 range. Technical indicators for the stock are Bullish and S&P gives PCAR a neutral 3 STAR (out of 5) hold rating. PCAR appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 39 covered call (PAQ AY) for a net debit in the $36.77 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 5.40% downside protection and a 6.06% assigned return rate for a 38.84% 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 PCAR Jan '11 22.50 Call (OKG AX) and selling the Jan '10 39 call (PAQ AY) for a $15.00 debit. The trade has a 57 day life and would provide 3.52% downside protection and a 10.00% assigned return rate for a 64.00% annualized return rate (for comparison purposes only). PACCAR has a current annual dividend yield of 0.91%. [FBB-Seven Summits Research]