Southern Co (SO) Just Shy Of Technical Resistance

Posted: Friday, November 20, 2009 9:18 AM EDT
By: Market Intelligence Center Staff

Southern Co (NYSE: SO) closed yesterday at $31.49. So far the stock has hit a 52-week low of $26.48 and 52-week high of $37.62. Southern Co stock has been showing support around 31.19 and resistance in the 31.93 range. Technical indicators for the stock are Bearish and S&P gives SO a neutral 3 STAR (out of 5) hold rating. SO appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Feb '10 31 covered call (SO BS) for a net debit in the $30.14 area. That is also the break even stock price for this trade. This covered call has a 92 day duration, provides 4.29% downside protection and a 2.85% assigned return rate for an 11.32% 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 SO Jan '11 25 Call (OBA AE) and selling the Feb '10 31 call (SO BS) for a $5.35 debit. The trade has a 92 day life and would provide 3.62% downside protection and a 12.15% assigned return rate for a 48.00% annualized return rate (for comparison purposes only). Southern Co has a current annual dividend yield of 5.51%. [FBB-Seven Summits Research]