Wachovia Capital Trust (WB) PriceWatch Alert Could Hit 22.97% Return

Posted on Wednesday, September 03, 2008 8:07 AM

Wachovia Capital Trust (NYSE: WB) ended the last trading session at $16.65. So far the stock has hit a 52-week low of $7.80 and 52-week high of $53.10. Wachovia Capital Trust stock has been showing support around 15.42 and resistance in the 17.90 range. Technical indicators for the stock are Bullish and S&P gives WB a weak 2 STAR (out of 5) sell rating. WB appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '09 10 covered call (WB DB) for a net debit in the $8.75 area. That is also the break even stock price for this trade. This covered call has a 227 day duration, provides 47.45% downside protection and a 14.29% assigned return rate for a 22.97% 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 WB Jan '10 2.50 Call (WVD AZ) and selling the Apr '09 10 call (WB DB) for a $6.45 debit. The trade has a 227 day life and would provide 46.25% downside protection and a 16.28% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Wachovia Capital Trust has a current annual dividend yield of 1.37%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]