Verizon Communications (VZ) 2/9/10 PriceWatch Alert With 4.30% Downside Protection

Posted: Tuesday, February 09, 2010 8:21 AM EDT
By: Market Intelligence Center Staff

Verizon Communications (NYSE: VZ) closed yesterday at $28.37. So far the stock has hit a 52-week low of $26.10 and 52-week high of $34.13. Verizon Communications stock has been showing support around 28.07 and resistance in the 28.97 range. Technical indicators for the stock are Bearish and S&P gives VZ a neutral 3 STAR (out of 5) hold rating. VZ appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jul '10 29 covered call for a net debit in the $27.15 area. That is also the break even stock price for this trade. This covered call has a 158 day duration, provides 4.30% downside protection and a 6.81% assigned return rate for a 15.74% 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 VZ Jan '11 25 Call and selling the Jul '10 29 call for a $2.98 debit. The trade has a 158 day life and would provide 1.37% downside protection and a 34.23% assigned return rate for a 79.00% annualized return rate (for comparison purposes only). Verizon Communications has a current annual dividend yield of 6.64%. [ATU-Seven Summits Research]