WellPoint Health Networks (WLP) PriceWatch Alert Targets 31.00% Return

Posted on Wednesday, July 23, 2008 8:07 AM

WellPoint Health Networks (NYSE: WLP) closed yesterday at $48.75. So far the stock has hit a 52-week low of $43.02 and 52-week high of $90.00. WellPoint Health Networks stock has been showing support around 45.33 and resistance in the 51.55 range. Technical indicators for the stock are Bearish and S&P gives WLP a weak 2 STAR (out of 5) sell rating. WLP appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Dec '08 50 covered call (WLP LJ) for a net debit in the $44.35 area. That is also the break even stock price for this trade. This covered call has a 150 day duration, provides 9.03% downside protection and a 12.74% assigned return rate for a 31.00% 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 WLP Jan '09 45 Call (WLP AI) and selling the Dec '08 50 call (WLP LJ) for a $3.35 debit. The trade has a 150 day life and would provide 0.82% downside protection and a 49.25% assigned return rate for a 120.00% annualized return rate (for comparison purposes only). WellPoint Health Networks does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]