Waste Management, Inc (WM) 11/27/09 PriceWatch Alert With 6.87% Downside Protection

Posted: Thursday, November 26, 2009 8:37 AM EDT

Waste Management, Inc (NYSE: WM) closed yesterday at $33.46. So far the stock has hit a 52-week low of $22.10 and 52-week high of $33.99. Waste Management stock has been showing support around 33.07 and resistance in the 33.85 range. Technical indicators for the stock are Bullish and S&P gives WM a positive 4 STAR (out of 5) buy rating. WM appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 32.50 covered call (WM DZ) for a net debit in the $31.16 area. That is also the break even stock price for this trade. This covered call has a 141 day duration, provides 6.87% downside protection and a 4.30% assigned return rate for an 11.13% 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 WM Jan '11 25 Call (VUW AE) and selling the Apr '10 32.50 call (WM DZ) for a $6.80 debit. The trade has a 141 day life and would provide 4.96% downside protection and a 10.29% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Waste Management has a current annual dividend yield of 3.59%. [FBB-Seven Summits Research]

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