Zimmer (ZMH) PriceWatch Alert for September 5, 2008

Posted on Friday, September 05, 2008 8:07 AM

Zimmer (NYSE: ZMH) closed yesterday at $68.41. 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 66.45 and resistance in the 72.27 range. Technical indicators for the stock are Bearish 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 a Dec '08 70 covered call (ZMH LN) for a net debit in the $64.61 area. That is also the break even stock price for this trade. This covered call has a 106 day duration, provides 5.55% downside protection and an 8.34% assigned return rate for a 28.73% 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 Dec '08 70 call (ZMH LN) for a $14.60 debit. The trade has a 106 day life and would provide no downside protection and a 2.74% assigned return rate for a 9.00% 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]