Union Pacific Corp. (UNP) NewsBite

Posted on Monday, February 25, 2008 9:07 AM

Union Pacific (NYSE: UNP) ended the last trading session at $124.13. So far the stock has hit a 52-week low of $95.51 and 52-week high of $137.56. Union Pacific stock has been showing support around 121.18 and resistance in the 125.60 range. Technical indicators for the stock are Bullish and S&P gives UNP a neutral 3 STAR (out of 5) hold rating. For a hedged play on this stock, look at an Apr '08 120 covered call (UNP DD) for a net debit in the $116.43 area. That is also the break even stock price for this trade. This covered call has a 54 day duration, provides 6.20% downside protection and a 3.07% assigned return rate for a 20.73% 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 UNP Jan '09 60 Call (VUJ AL) and selling the Apr '08 120 call (UNP DD) for a $56.45 debit. The trade has a 54 day life and would provide 6.19% downside protection and a 6.29% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). Union Pacific has a current annual dividend yield of 1.40%. [IHF - Investors Observer]