Medtronic (MDT) Trades Lower On Heavy Volume

Posted: Thursday, November 19, 2009 8:26 AM EDT

Medtronic (NYSE: MDT) closed yesterday at $39.71. So far the stock has hit a 52-week low of $24.06 and 52-week high of $40.22. Medtronic stock has been showing support around 39.17 and resistance in the 40.37 range. Technical indicators for the stock are Bullish and S&P gives MDT a positive 4 STAR (out of 5) buy rating. MDT appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 40 covered call (JIW AH) for a net debit in the $38.11 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 4.03% downside protection and a 4.96% assigned return rate for a 31.21% 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 MDT Jan '11 25 Call (VKD AE) and selling the Jan '10 40 call (JIW AH) for a $13.40 debit. The trade has a 58 day life and would provide 3.30% downside protection and an 11.94% assigned return rate for a 75.00% annualized return rate (for comparison purposes only). Medtronic has a current annual dividend yield of 2.05%. [THA-Seven Summits Research]

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