Zimmer (ZMH) 11/19/09 PriceWatch Alert Up To 2.58% Downside Protection

Posted: Thursday, November 19, 2009 8:43 AM EDT

Zimmer (NYSE: ZMH) closed yesterday at $58.03. So far the stock has hit a 52-week low of $30.67 and 52-week high of $58.20. Zimmer stock has been showing support around 56.66 and resistance in the 58.88 range. Technical indicators for the stock are Bullish and S&P gives ZMH a positive 4 STAR (out of 5) buy rating. ZMH appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 60 covered call (ZMH AL) for a net debit in the $56.53 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 2.58% downside protection and a 6.14% assigned return rate for a 38.63% 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 ZMH Jan '11 40 Call (OFH AH) and selling the Jan '10 60 call (ZMH AL) for an $18.00 debit. The trade has a 58 day life and would provide 0.05% downside protection and an 11.11% assigned return rate for a 70.00% annualized return rate (for comparison purposes only). Zimmer does not pay dividends at this time. [THA-Seven Summits Research]

Click Symbol For More News On: (ZMH)