China Life Insurance (LFC) NewsBite

Posted on Monday, June 23, 2008 9:03 AM

China LIfe Insurance (NYSE: LFC) ended the last trading session at $53.19. So far the stock has hit a 52-week low of $48.17 and 52-week high of $106.75. China LIfe Insurance stock has been showing support around 51.92 and resistance in the 55.44 range. Technical indicators for the stock are Bearish and S&P gives LFC a neutral 3 STAR (out of 5) hold rating. For a hedged play on this stock, look at an Oct '08 52.50 covered call (LFC JE) for a net debit in the $47.49 area. That is also the break even stock price for this trade. This covered call has an 117 day duration, provides 10.72% downside protection and a 10.55% assigned return rate for a 32.91% 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 LFC Jan '09 40 Call (LFC AH) and selling the Oct '08 52.50 call (LFC JE) for a $9.90 debit. The trade has an 117 day life and would provide 6.19% downside protection and a 26.26% assigned return rate for an 82.00% annualized return rate (for comparison purposes only). China LIfe Insurance has a current annual dividend yield of 1.60%. [IHF - Investors Observer]