Union Pacific Corp. (UNP) NewsBite

Posted on Friday, May 09, 2008 8:59 AM

Union Pacific (NYSE: UNP) closed yesterday at $147.19. So far the stock has hit a 52-week low of $99.38 and 52-week high of $149.37. Union Pacific stock has been showing support around 144.41 and resistance in the 148.87 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 Aug '08 145 covered call (UNP HI) for a net debit in the $136.79 area. That is also the break even stock price for this trade. This covered call has a 99 day duration, provides 7.07% downside protection and a 6.00% assigned return rate for a 22.13% 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 UNP Jan '09 105 Call (VUJ AA) and selling the Aug '08 145 call (UNP HI) for a $34.65 debit. The trade has a 99 day life and would provide 5.12% downside protection and a 15.44% assigned return rate for a 57.00% annualized return rate (for comparison purposes only). Union Pacific has a current annual dividend yield of 1.20%. [IHF - Investors Observer]