American Electric Power Company (AEP) Climbed 1.5% Friday On Bullish Technicals And Closed Just Under Resistance

American Electric Power Company (NYSE: AEP) ended the last trading session at $31.43. So far the stock has hit a 52-week low of $24.00 and 52-week high of $34.34. American Electric Power stock has been showing support around 30.45 and resistance in the 31.97 range. Technical indicators for the stock are Bullish and S&P gives AEP a positive 4 STAR (out of 5) buy rating. AEP appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 32 covered call (AEP AO) for a net debit in the $30.63 area. That is also the break even stock price for this trade. This covered call has an 89 day duration, provides 2.55% downside protection and a 4.47% assigned return rate for an 18.34% 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 AEP Jan '11 25 Call (OPB AE) and selling the Jan '10 32 call (AEP AO) for a $5.80 debit. The trade has an 89 day life and would provide 2.00% downside protection and a 20.69% assigned return rate for an 85.00% annualized return rate (for comparison purposes only). American Electric Power has a current annual dividend yield of 5.38%.

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