Lexmark International (NYSE:LXK) is a developer, manufacturer and supplier of printing and imaging solutions for offices and homes. Lexmark's products include laser printers, inkjet printers, multifunction devices, associated supplies, services and solutions. Lexmark develops and owns most of the technology for its laser and inkjet products, and associated supplies. Lexmark also sells dot matrix printers for printing single and multi-part forms by business users, and develops, manufactures and markets a line of other office-imaging products. he company is primarily managed along business and consumer market segments and its products are sold in more than 150 countries around the globe.
Shares of LXK have been in a mild downtrend since July, 2004 and the past week saw the stock price dip to within a few cents of a 15-month low on moderate trading volume. While the recent activity places the issue in an "oversold" condition, there appears to be few catalysts to provoke a significant rebound in the coming month. The current credit for the spread is a bit low with regard to expected profit, however traders may be able to improve the prices for each position (especially if there is any near-term volatility in the underlying issue). Those with additional portfolio capital should consider a 10-contract position to offset the effects of commission costs on the potential return on investment.
Fundamentals Chart Earnings Dates Analyst Ratings
PLAY (conservative - bearish/credit spread):
BUY CALL APR-90.00 LXK-DR OI=1712 ASK=$0.15
SELL CALL APR-85.00 LXK-DQ OI=1752 BID=$0.40
INITIAL "NET-CREDIT" TARGET = $0.30-$0.40
POTENTIAL PROFIT (X 5 contracts) = $150
RETURN ON INVESTMENT (max) = 6.3%
COST BASIS = $85.30
LOSS-LIMIT/EXIT POINT = $83.25 (cons) - $84.50 (aggr)