Norfolk Southern (NSC) PriceWatch Alert Down To $62.74 Break Even

Posted on Friday, August 22, 2008 8:07 AM

Norfolk Southern (NYSE: NSC) closed yesterday at $69.54. So far the stock has hit a 52-week low of $41.36 and 52-week high of $75.53. Norfolk Southern stock has been showing support around 65.83 and resistance in the 71.87 range. Technical indicators for the stock are Bullish and S&P gives NSC a positive 4 STAR (out of 5) buy rating. NSC appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Oct '08 65 covered call (NSC JM) for a net debit in the $62.74 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 9.78% downside protection and a 3.60% assigned return rate for a 23.07% 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 NSC Jan '10 30 Call (YGC AF) and selling the Oct '08 65 call (NSC JM) for a $33.45 debit. The trade has a 57 day life and would provide 8.76% downside protection and a 4.63% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Norfolk Southern has a current annual dividend yield of 1.84%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]