Exxon Mobil (XOM) 11/20/09 PriceWatch Alert With $67.70 Break Even

Posted: Friday, November 20, 2009 8:04 AM EDT

Exxon Mobil (NYSE: XOM) closed yesterday at $74.65. So far the stock has hit a 52-week low of $61.86 and 52-week high of $83.64. Exxon Mobil stock has been showing support around 73.68 and resistance in the 75.38 range. Technical indicators for the stock are Bullish and S&P gives XOM a very positive 5 STAR (out of 5) strong buy rating. XOM appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 70 covered call (XOM DN) for a net debit in the $67.70 area. That is also the break even stock price for this trade. This covered call has a 148 day duration, provides 9.31% downside protection and a 3.40% assigned return rate for an 8.38% 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 XOM Jan '11 45 Call (ODU AI) and selling the Apr '10 70 call (XOM DN) for a $23.25 debit. The trade has a 148 day life and would provide 8.57% downside protection and a 7.53% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). Exxon Mobil has a current annual dividend yield of 2.24%. [FBB-Seven Summits Research]

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