Wells Fargo (WFC) 2/9/10 PriceWatch Alert At $22.28 Break Even

Posted: Tuesday, February 09, 2010 8:47 AM EDT
By: Market Intelligence Center Staff

Wells Fargo (NYSE: WFC) closed yesterday at $26.43. So far the stock has hit a 52-week low of $7.80 and 52-week high of $31.53. Wells Fargo stock has been showing support around 25.74 and resistance in the 27.76 range. Technical indicators for the stock are Bearish and S&P gives WFC a positive 4 STAR (out of 5) buy rating. WFC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jul '10 24 covered call for a net debit in the $22.28 area. That is also the break even stock price for this trade. This covered call has a 158 day duration, provides 15.70% downside protection and a 7.72% assigned return rate for a 17.83% 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 WFC Jan '11 15 Call and selling the Jul '10 24 call for an $8.05 debit. The trade has a 158 day life and would provide 12.79% downside protection and an 11.80% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Wells Fargo has a current annual dividend yield of 0.74%. [ATU-Seven Summits Research]