Zimmer (ZMH) PriceWatch Alert With $67.48 Break Even

Posted on Monday, September 08, 2008 8:07 AM

Zimmer (NYSE: ZMH) ended the last trading session at $69.78. 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 67.03 and resistance in the 71.31 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 75 covered call (ZMH LO) for a net debit in the $67.48 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 3.30% downside protection and an 11.14% assigned return rate for a 39.49% 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 75 call (ZMH LO) for a $17.00 debit. The trade has a 103 day life and would provide no downside protection and a 17.65% assigned return rate for a 63.00% 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]