Genzyme (GENZ) 11/20/09 PriceWatch Alert Bearish Price Movement

Posted: Friday, November 20, 2009 8:25 AM EDT

Genzyme (NasdaqNM: GENZ) closed yesterday at $49.63. So far the stock has hit a 52-week low of $47.09 and 52-week high of $73.75. Genzyme stock has been showing support around 49.18 and resistance in the 50.20 range. Technical indicators for the stock are Bearish and S&P gives GENZ a neutral 3 STAR (out of 5) hold rating. GENZ appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 50 covered call (GZQ AJ) for a net debit in the $47.08 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 5.14% downside protection and a 6.20% assigned return rate for a 39.72% 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 GENZ Jan '11 25 Call (OZG AE) and selling the Jan '10 50 call (GZQ AJ) for a $23.35 debit. The trade has a 57 day life and would provide 2.58% downside protection and a 7.07% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). Genzyme does not pay dividends at this time. [FBB-Seven Summits Research]

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