Valero Energy (VLO) Displays Bearish Technical Indicators But Support Near 16.37

Posted: Wednesday, September 08, 2010 8:59 AM EDT
By: Market Intelligence Center Staff

Valero Energy (NYSE: VLO) ended the last trading session at $16.92. So far the stock has hit a 52-week low of $15.49 and 52-week high of $21.78. Valero Energy stock has been showing support around 16.37 and resistance in the 17.39 range. Technical indicators for the stock are Bearish and S&P gives VLO a neutral 3 STAR (out of 5) hold rating. VLO appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Dec '10 16 covered call for a net debit in the $15.09 area. That is also the break even stock price for this trade. This covered call has a 101 day duration, provides 10.82% downside protection and a 6.03% assigned return rate for a 21.79% 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 VLO Jan '12 5 Call and selling the Dec '10 16 call for a $10.27 debit. The trade has a 101 day life and would provide 9.75% downside protection and a 7.11% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Valero Energy has a current annual dividend yield of 1.20%. [WBA-Seven Summits Research]