H and R Block (HRB) 9/8/10 PriceWatch Alert Could Hit 17.42% Return

Posted: Wednesday, September 08, 2010 8:46 AM EDT
By: Market Intelligence Center Staff

H and R Block (NYSE: HRB) ended the last trading session at $12.51. So far the stock has hit a 52-week low of $12.45 and 52-week high of $23.23. H and R Block stock has been showing support around 11.94 and resistance in the 13.54 range. Technical indicators for the stock are Bearish and S&P gives HRB a neutral 3 STAR (out of 5) hold rating. HRB appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '11 12 covered call for a net debit in the $10.86 area. That is also the break even stock price for this trade. This covered call has a 220 day duration, provides 13.19% downside protection and a 10.50% assigned return rate for a 17.42% 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 HRB Jan '12 7.50 Call and selling the Apr '11 12 call for a $3.65 debit. The trade has a 220 day life and would provide 10.87% downside protection and a 23.29% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). H and R Block has a current annual dividend yield of 4.77%. [WBA-Seven Summits Research]