Abbott Laboratories (ABT) PriceWatch Alert With 2.13% Downside Protection

Posted on Friday, August 29, 2008 8:07 AM

Abbott Laboratories (NYSE: ABT) closed yesterday at $58.75. So far the stock has hit a 52-week low of $50.09 and 52-week high of $61.09. Abbott Laboratories stock has been showing support around 57.35 and resistance in the 59.57 range. Technical indicators for the stock are Bullish and S&P gives ABT a positive 4 STAR (out of 5) buy rating. ABT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Oct '08 60 covered call (ABT JL) for a net debit in the $57.50 area. That is also the break even stock price for this trade. This covered call has a 50 day duration, provides 2.13% downside protection and a 4.35% assigned return rate for a 31.74% 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 ABT Jan '10 30 Call (WBT AF) and selling the Oct '08 60 call (ABT JL) for a $27.65 debit. The trade has a 50 day life and would provide 1.87% downside protection and an 8.50% assigned return rate for a 62.00% annualized return rate (for comparison purposes only). Abbott Laboratories has a current annual dividend yield of 2.49%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]