Range Resources (RRC) 11/20/09 PriceWatch Alert Could Hit 33.86% Return

Posted: Friday, November 20, 2009 8:40 AM EDT
By: Market Intelligence Center Staff

Range Resources (NYSE: RRC) closed yesterday at $46.64. So far the stock has hit a 52-week low of $28.05 and 52-week high of $60.13. Range Resources stock has been showing support around 44.89 and resistance in the 48.11 range. Technical indicators for the stock are Bearish and S&P gives RRC a neutral 3 STAR (out of 5) hold rating. RRC appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 45 covered call (RRC AI) for a net debit in the $42.74 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 8.36% downside protection and a 5.29% assigned return rate for a 33.86% 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 RRC Jan '11 17.50 Call (XPM AW) and selling the Jan '10 45 call (RRC AI) for a $25.40 debit. The trade has a 57 day life and would provide 8.02% downside protection and an 8.27% assigned return rate for a 53.00% annualized return rate (for comparison purposes only). Range Resources has a current annual dividend yield of 0.33%. [FBB-Seven Summits Research]