Terex--Potential Terex (TEX) Trade Targets 29.60% Return

Terex Corp (NYSE: TEX) closed Thursday's trading session at $30.97. In the past year, the stock has hit a 52-week low of $16.79 and 52-week high of $31.23. Terex stock has been showing support around $30.53 and resistance in the $31.45 range. Technical indicators for the stock are Bullish and S&P gives TEX a neutral 3 STARS (out of 5) hold rating. For a hedged play on this stock, look at the Feb '11 $29.00 covered call for a net debit in the $27.87 area. That is also the break-even stock price for this trade. This covered call has a duration of 50 days, provides 10.01% downside protection and an assigned return rate of 4.05% for an annualized return rate of 29.60% (for 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 TEX Jan '12 $10.00 call and selling the Feb '11 $29.00 call for a total debit of $18.50. The trade has a lifespan of 50 days and would provide 7.98% downside protection and an assigned return rate of 2.70% for an annualized return rate of 20% (for comparison purposes only). Terex does not pay dividends at this time. [ATU-Seven Summits Research]

Source: market intelligence center