Potential Aluminum Corporation of China (ACH) Trade Has 7.83% Downside Protection

Aluminum Corp of China (NYSE: ACH) closed Wednesday's trading session at $23.62. In the past year, the stock has hit a 52-week low of $18.03 and 52-week high of $26.80. Aluminum Corporation of China stock has been showing support around $22.70 and resistance in the $24.08 range. Technical indicators for the stock are Bearish. For a hedged play on this stock, look at the Aug '11 $23.00 covered call for a net debit in the $21.77 area. That is also the break-even stock price for this trade. This covered call has a duration of 114 days, provides 7.83% downside protection and an assigned return rate of 5.65% for an annualized return rate of 18.09% (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 ACH Jan '12 $17.50 call and selling the Aug '11 $23.00 call for a total debit of $4.65. The trade has a lifespan of 114 days and would provide 6.22% downside protection and an assigned return rate of 18.28% for an annualized return rate of 59% (for comparison purposes only). Aluminum Corporation of China does not pay dividends at this time.