Wells Fargo (WFC) PriceWatch Alert Up To 27.70% Return

Posted on Tuesday, August 19, 2008 8:07 AM

Wells Fargo (NYSE: WFC) closed yesterday at $28.80. So far the stock has hit a 52-week low of $20.46 and 52-week high of $37.99. Wells Fargo stock has been showing support around 27.77 and resistance in the 30.39 range. Technical indicators for the stock are Neutral and S&P gives WFC a neutral 3 STAR (out of 5) hold rating. WFC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '09 29 covered call (WFC DL) for a net debit in the $24.50 area. That is also the break even stock price for this trade. This covered call has a 242 day duration, provides 14.93% downside protection and an 18.37% assigned return rate for a 27.70% 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 '10 17.50 Call (WWR AT) and selling the Apr '09 29 call (WFC DL) for an $8.70 debit. The trade has a 242 day life and would provide 9.03% downside protection and a 32.18% assigned return rate for a 49.00% annualized return rate (for comparison purposes only). Wells Fargo has a current annual dividend yield of 4.64%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]