Cardinal Health (CAH) 3/10/10 PriceWatch Alert Could Hit 15.06% Return

Posted: Wednesday, March 10, 2010 8:27 AM EDT
By: Market Intelligence Center Staff

Cardinal Health (NYSE: CAH) closed yesterday at $35.20. So far the stock has hit a 52-week low of $24.87 and 52-week high of $37.23. Cardinal Health stock has been showing support around 34.89 and resistance in the 35.57 range. Technical indicators for the stock are Bullish and S&P gives CAH a positive 4 STAR (out of 5) buy rating. CAH appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jun '10 35 covered call for a net debit in the $33.60 area. That is also the break even stock price for this trade. This covered call has a 101 day duration, provides 4.55% downside protection and a 4.17% assigned return rate for a 15.06% 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 CAH Jan '11 25 Call and selling the Jun '10 35 call for an $8.80 debit. The trade has a 101 day life and would provide 3.98% downside protection and a 13.64% assigned return rate for a 49.00% annualized return rate (for comparison purposes only). Cardinal Health has a current annual dividend yield of 1.97%. [WBA-Seven Summits Research]