Precision Castparts (PCP) 11/20/09 PriceWatch Alert Down To $96.71 Break Even

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

Precision Castparts (NYSE: PCP) closed yesterday at $103.91. So far the stock has hit a 52-week low of $47.08 and 52-week high of $107.14. Precision Castparts stock has been showing support around 101.09 and resistance in the 106.07 range. Technical indicators for the stock are Bullish and S&P gives PCP a positive 4 STAR (out of 5) buy rating. PCP appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 100 covered call (PCP AT) for a net debit in the $96.71 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 6.93% downside protection and a 3.40% assigned return rate for a 21.78% 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 PCP Jan '11 40 Call (XAM AH) and selling the Jan '10 100 call (PCP AT) for a $56.90 debit. The trade has a 57 day life and would provide 6.75% downside protection and a 5.45% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). Precision Castparts has a current annual dividend yield of 0.11%. [FBB-Seven Summits Research]