Automatic Data Processing (ADP) 9/3/10 PriceWatch Alert Up To 18.36% Return

Posted: Friday, September 03, 2010 8:18 AM EDT
By: Market Intelligence Center Staff

Automatic Data Processing (NASDAQ: ADP) closed yesterday at $39.69. So far the stock has hit a 52-week low of $26.46 and 52-week high of $45.74. Automatic Data Processing stock has been showing support around 38.98 and resistance in the 40.16 range. Technical indicators for the stock are Bearish and S&P gives ADP a positive 4 STAR (out of 5) buy rating. ADP appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Nov '10 40 covered call for a net debit in the $38.49 area. That is also the break even stock price for this trade. This covered call has a 78 day duration, provides 3.02% downside protection and a 3.92% assigned return rate for an 18.36% 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 ADP Jan '12 25 Call and selling the Nov '10 40 call for a $13.55 debit. The trade has a 78 day life and would provide 2.87% downside protection and a 10.70% assigned return rate for a 50.00% annualized return rate (for comparison purposes only). Automatic Data Processing has a current annual dividend yield of 3.52%. [FBB-Seven Summits Research]