Century Aluminum (NASDAQ:CENX) closed Monday's losing trading session at $19.65. In the past year, the stock has hit a 52-week low of $8.25 and 52-week high of $20.76. Century Aluminum stock has been showing support around $18.90 and resistance in the $20.86 range. Technical indicators for the stock are Bullish. For a hedged play on this stock, look at the Sep '11 $18.00 covered call for a net debit in the $16.40 area. That is also the break-even stock price for this trade. This covered call has a duration of 158 days, provides 16.54% downside protection and an assigned return rate of 9.76% for an annualized return rate of 22.54% (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 CENX Jan '12 $12.50 call and selling the Sep '11 $18.00 call for a total debit of $4.70. The trade has a lifespan of 158 days and would provide 12.47% downside protection and an assigned return rate of 17.02% for an annualized return rate of 39% (for comparison purposes only). Century Aluminum does not pay dividends at this time
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