Royal Caribbean Cruises (RCL) Up Over 8% And In Tight Support/Resistance Range

Royal Caribbean Cruises (NYSE: RCL) closed yesterday at $21.35. So far the stock has hit a 52-week low of $5.40 and 52-week high of $25.02. Royal Caribbean Cruises stock has been showing support around 20.33 and resistance in the 22.11 range. Technical indicators for the stock are Bearish and S&P gives RCL a positive 4 STAR (out of 5) buy rating. RCL appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '10 17.50 covered call (RCL CW) for a net debit in the $16.15 area. That is also the break even stock price for this trade. This covered call has a 141 day duration, provides 24.36% downside protection and an 8.36% assigned return rate for a 21.64% 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 RCL Jan '11 5 Call (OAB AA) and selling the Mar '10 17.50 call (RCL CW) for an $11.40 debit. The trade has a 141 day life and would provide 23.19% downside protection and a 9.65% assigned return rate for a 25.00% annualized return rate (for comparison purposes only). Royal Caribbean Cruises does not pay dividends at this time.

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