BP (NYSE: BP) closed yesterday at $61.62. So far the stock has hit a 52-week low of $57.85 and 52-week high of $79.77. BP stock has been showing support around 60.17 and resistance in the 62.87 range. Technical indicators for the stock are Bearish and S&P gives BP a neutral 3 STAR (out of 5) hold rating. BP appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Oct ‘08 60 covered call (BP JL) for a net debit in the $56.92 area. That is also the break even stock price for this trade. This covered call has a 93 day duration, provides 7.63% downside protection and a 5.41% assigned return rate for a 21.24% 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 BP Jan ‘09 50 Call (BP AJ) and selling the Oct ‘08 60 call (BP JL) for an $8.20 debit. The trade has a 93 day life and would provide 5.55% downside protection and a 21.95% assigned return rate for an 86.00% annualized return rate (for comparison purposes only). BP does not pay dividends at this time.

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