Zimmer (ZMH) PriceWatch Alert Could Hit 62.99% Return

Posted on Monday, August 25, 2008 8:07 AM

Zimmer (NYSE: ZMH) ended the last trading session at $74.08. So far the stock has hit a 52-week low of $63.00 and 52-week high of $85.91. Zimmer stock has been showing support around 72.62 and resistance in the 74.98 range. Technical indicators for the stock are Bullish and S&P gives ZMH a neutral 3 STAR (out of 5) hold rating. ZMH appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Oct '08 80 covered call (ZMH JP) for a net debit in the $73.18 area. That is also the break even stock price for this trade. This covered call has a 54 day duration, provides 1.21% downside protection and a 9.32% assigned return rate for a 62.99% 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 ZMH Jan '10 55 Call (YEY AK) and selling the Oct '08 80 call (ZMH JP) for a $22.35 debit. The trade has a 54 day life and would provide no downside protection and an 11.86% assigned return rate for an 80.00% annualized return rate (for comparison purposes only). Zimmer 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]